The Dow Jones Industrial Average rose 133 points, or 0.4%, to 31,720, while the Nasdaq gained 0.6%.
Health care stocks posted broad gains. Regeneron rose 16.9% after the company and partner Bayer reported encouraging research data on the anti-blindness drug. Banks also rose broadly. JPMorgan Chase rose 2.1%.
Bond yields remained largely flat. The yield on the 10-year Treasury, which influences interest rates on mortgages and other loans, fell to 3.25% on Tuesday from 3.27%. The two-year Treasury yield, which tends to track expectations for Fed action, rose to 3.47% from 3.44%.
Interest rate policy was a sharp focus for investors, as was the European Central Bank the largest percentage increase, in line with the steps taken by the Fed and other central banks to combat inflation. The bank’s 25-member board on Thursday raised its benchmark by three-quarters of a percentage point.
Meanwhile, Fed Chairman Jerome Powell reaffirmed the Fed’s commitment Keeping rates high “until the job is done” to return to the 2% target.
“There is a record of failed attempts to control inflation, which only increases the ultimate cost to society,” he said during a monetary policy conference at the Cato Institute, a libertarian think tank.
The central bank has already raised rates four times this year, and markets expect another hike of three-quarters of a percentage point at its next meeting in two weeks.
One of the Fed’s biggest fears is that households and businesses begin to expect inflation to remain high over the long term, which could cause them to start buying, creating a vicious cycle that makes it harder to shake inflation.
The Fed has faced criticism for not taking inflation seriously sooner, and Powell said setting interest rate policy is as much an art as a science. The big question remains whether the high inflation caused by the pandemic that is destroying economies around the world is a one-off or the beginning of something more lasting.
European markets were higher, while markets in Asia were mixed. Japan’s Nikkei 225 index increased by 2.3%.
AP Business Writer Stan Choe contributed to this report.
