Stocks Close Higher, Extending Last Week’s Gains

Nike advanced after the apparel maker reported revenue that beat analysts’ expectations. Technology stocks also rose, as investors returned to faster-growing companies whose shares were battered earlier this year.

“You’re beginning to see a little bit of the revenge of growth stocks,”[ads1]; said Wayne Wilbanks, co-founder and chief investment officer of Wilbanks Smith & Thomas Asset Management LLC. “Prices have collapsed, so valuations have gotten much better, to the point where that outweighs interest-rate concerns.”

The stock benchmarks closed lower on Monday after Federal Reserve Chairman Jerome Powell said the central bank was prepared to raise interest rates in half-percentage-point steps if needed to tamp down inflation. By Tuesday morning, though, investors were interpreting Mr. Powell’s comments as a vote of confidence in the economy’s outlook.

“The message that came out of the [Fed] meeting last week is that they are going to be tightening [monetary policy] but the US economy is resilient enough to withstand that, ”said Huw Roberts, head of analytics at Quant Insight, a data analytics firm. “The equity market chose to emphasize the economic resilience portion.”

Tuesday saw gains from shares of banks and other financial firms poised to benefit from higher long-term interest rates. Oil price rose, then fell, then reversed twice more.

A selloff in government bonds intensified, sending the yield on the 10-year US Treasury note to 2.375%, from 2.315% Monday. The yield on the benchmark note is now around its highest level since May 2019, before the Covid-19 pandemic upended financial markets. Yields rise when bond prices decline.

In the energy markets, futures for Brent crude, the international benchmark, fell 0.1% to $ 115.48 a barrel. Last week, Brent prices fell below $ 100 before reversing. Support for a European Union-wide ban on the purchase of Russian oil is growing inside the bloc, raising the possibility of continued volatility.

“Looking at the market’s leadership today, it’s a mixed bag,” said John Lynch, chief investment officer for Comerica Wealth Management. “The equity market appears tame, but the bond market does not.”

Stocks, bonds, commodities and currencies have been whipsawed by volatility for the past month as investors have tried to assess the economic fallout from Russia’s war in Ukraine. For the 39th time this year, the tech-heavy Nasdaq Composite closed Tuesday with a move of 1% or more, representing its most-volatile quarter since the first three months of 2009.

Many investors have feared that the war could keep inflation sustained and stunt economic growth in the US and Europe.

This week, though, investors were thrown a new curveball when Mr. Powell, speaking Monday, struck a tougher tone than the one he used when the Fed lifted interest rates from near zero last week. He stressed the uncertainty facing the central bank and said the Fed would shift into a more restrictive stance if needed.

The comments prompted some analysts and investors to reassess interest-rate expectations. Economists at Goldman Sachs said in a note after Mr. Powell’s remarks that they now expect half-percentage-point increases at both of the Fed’s May and June meetings. That compares with expectations of quarter-percentage-point increases at both of the meetings previously.

Monday’s comments heightened investor fears that the Fed could be tightening more quickly just as the economy is slowing. “The big variable now is the economic growth side of things,” Mr. Roberts said.

Many investors are keeping a close watch on the so-called yield curve, which measures the spread between short- and long-term rates and is often seen as a strong indicator of sentiment about the prospects for economic growth. Recently, the gap between yields on shorter-term and longer-term US Treasury bonds has been shrinking, stirring anxieties that the bond market is close to signaling a potential recession.

The two-year Treasury yield — which is particularly sensitive to changes in monetary policy — climbed to 2.152% Tuesday, from 2.132% Monday.

Shares of banks rose. Financial stocks helped lead the S&P 500’s gains, with the sector rising about 1.6%. Wells Fargo jumped $ 2.25, or 4.4%, to $ 53.39, while Signature Bank rose $ 10.30, or 3.3%, $ 321.18.

Nike rose $ 2.90, or 2.2%, to close at $ 133.09.

“Nike is the ultimate global company, as they sell and source all over the world,” said Jack Ablin, chief investment officer at Cresset Capital. “It’s a great barometer, and they assuaged a lot of investors’ concerns.”

Communications and technology stocks also gained. Etsy rose $ 5.98, or 4.2%, to $ 148.25, while Match Group jumped $ 4.28, or 4.3%, to $ 104.31. Amazon.com climbed for a sixth consecutive day, according to Dow Jones Market Data. The stock closed at $ 3,297.78, up $ 67.95, or 2.1%.

Okta fell $ 2.98, or 1.8%, to $ 166.43 after a hacking group posted screenshots purporting to show that it had gained access to Okta.com’s administrator and other systems. The company said Tuesday that a preliminary investigation found no evidence of any malicious activity, adding that the screenshots were most likely related to a January security incident.

Bitcoin rose about 3.5% from its 5 pm ET level Monday to trade around $ 42,611. The price of the cryptocurrency has swung sharply within the past month but has largely traded above $ 40,000 since the middle of last week.

In Europe, the pan-continental Stoxx Europe 600 increased 0.9%, rising for a fifth consecutive session.

In Asia, Hong Kong’s Hang Seng gained about 3.2%, while Japan’s Nikkei 225 rose 1.5%. China’s Shanghai Composite advanced 0.2%.

Write to Justin Baer at justin.baer@wsj.com and Caitlin McCabe at caitlin.mccabe@wsj.com

Corrections & Amplifications
The Nasdaq Composite rose 270.36 points Tuesday, while shares of Wells Fargo closed at $ 53.39. An earlier version of this article incorrectly said the Nasdaq index had risen 20.36 points and that Wells Fargo shares closed at $ 52.39. (Corrected on March 22.)