By Geoffrey Smith
Investing.com -- U.S. stock markets opened higher on Tuesday, with bank stocks, in particular, responding well to hawkish comments from Federal Reserve Chairman Jerome Powell that pointed to a faster pace of monetary tightening in the next couple of months.
By 9:45 AM ET (1345 GMT), the Dow Jones Industrial Average was up 213 points, or 0.6%, at 34,766 points. The S&P 500 was also up 0.6% and the Nasdaq Composite was up 0.7%. All three indices finished lower on Monday, reversing earlier gains after Powell warned that inflation was "much too high" and that the Fed “may well reach the conclusion that we need to move more quickly.”
Goldman Sachs analysts told clients in a morning note that they now expect 50 basis point hikes at each of the Fed's next two policy meetings in May and June, followed by quarter-point hikes in each of the Fed meetings in the second half of the year. Bond yields, which shot higher in response to the news on Monday, continued to rise on Tuesday, gaining around 5 basis points all along the curve.
That movement supported bank stocks, in particular, for whom higher bond yields generally presage wider lending margins. Bank of America (NYSE:BAC) stock rose 3.8% in early dealings, while JPMorgan Chase (NYSE:JPM) stock rose 2.9%.
The news also supported companies with relatively low levels of leverage and high cash balances. Berkshire Hathaway (NYSE:BRKa) stock, already in vogue after Monday's agreement to buy insurance-heavy conglomerate Alleghany (NYSE:Y), rose another 1.1%.
Another stock to stand out in early trade was Nike (NYSE:NKE). The world's biggest sportswear maker rose 5.8% to its highest in three weeks after reporting earnings that suggested it had overcome the worst of COVID-19 related supply chain disruptions, even though the report bore out fears that it's suffering from a backlash against its products in China.
Elsewhere, Alibaba (NYSE:BABA) ADRs rose 10.8% to their highest in five weeks after the Chinese e-commerce giant raised its share buyback program by $9 billion to $25 billion. The ADRs have lost nearly two-thirds of their value in the last five months, one of the biggest paper losses of all time, but have started to attract more favorable comments from an analyst community that increasingly thinks that the regulatory risks facing the company are now adequately priced in.
Rival Chinese e-commerce company Pinduoduo (NASDAQ:PDD) saw its ADRs also rise by 10.8%, thanks mainly to better-than-expected operating results in the latest quarter.
Tesla (NASDAQ:TSLA) stock meanwhile rose 1.4% as the company started deliveries from its new factory in Germany, eight months after its original start date. The start of production comes at an opportune time, when its Shanghai factory, which has been used to export to the European market, is facing ongoing interruptions to its business from mass COVID-19 testing both on-site and in important logistics centers around the factory.