Stocks Open Higher, While Bond Yields Edge Down

Some of the U.S.’s biggest lenders reported rising earnings before the market opened. Bank of America shares rose 2.9% after the lender reported a jump in fourth-quarter profits, while Morgan Stanley’s shares gained 1.7% on profits that topped forecasts. U.S. Bancorp fell almost 6% after the bank holding company posted a rise in compensation costs. This earnings season, Goldman Sachs,

JPMorgan Chase

and

Citigroup

have also reported shelling out more in compensation. 

Procter & Gamble

said consumers were undeterred by higher prices, leading to higher revenue and lifting shares of the consumer-goods company 4.2%.

Government-bond prices edged up, pushing down yields. Yields on benchmark 10-year Treasury notes slipped to 1.852% from 1.866% Tuesday, which was their highest level since January 2020. Yields on interest rate-sensitive two-year notes were down to 1.010% from 1.038% Tuesday.

The first few weeks of the year have been tumultuous. In January, many investors started positioning for a world that looks very different from last year. Interest rates are supposed to start rising and some investors are positioning for the Covid-19 pandemic to turn into an endemic.

Investors have stepped up bets that the Federal Reserve and other major central banks will tighten monetary policy in the coming months, withdrawing a pillar of support for markets. Mounting expectations of interest-rate rises follow evidence that the drivers of inflation have broadened beyond the supply-chain shock that fueled price gains for much of 2021.

As a result, many investors have backed away from one of the hottest areas of the market: tech. The Nasdaq Composite was down almost 10% from its high as of Tuesday.

And there are signs that individual investors—a key force behind 2021’s stock-market rally—are cooling on tech, according to analysts at Vanda Research. Retail investors have been buying shares of financials and energy companies while their purchases of highflying stocks like

Advanced Micro Devices

and

Nvidia

have been dwindling, according to Vanda.

The S&P 500’s value index is outperforming its growth index by around 6.8 percentage points this month, on pace for the biggest monthly outperformance since December 2000, according to Dow Jones Market Data.

Recent volatility is “really all about inflation and how aggressive central banks are going to be to counteract it,” said

Brian O’Reilly,

head of market strategy at Mediolanum Asset Management, adding that inflation could also curtail economic growth by knocking consumption. ”Certainly, the market is nervous at the moment.”

Europe’s most closely watched government bond yield turned positive for the first time since 2019. The yield on 10-year German bund rose as high as 0.021% Wednesday after trading in negative territory for over 30 months. It then eased to 0.010%. Ten-year U.K. yields, meanwhile, reached their highest level since March 2019 after data showed inflation hitting a 30-year high.

Oil prices rose again after touching seven-year highs Tuesday. Most-active U.S. crude futures rose around 1% to $85.55 a barrel, extending a rally driven in part by the potential for supply disruptions in Russia and the Middle East.

Overseas stock markets were mixed following Tuesday’s selloff on Wall Street. The Stoxx Europe 600 rose 0.7%, as gains for retail and resource stocks offset losses for food, drink and insurance companies. Asian stocks came under pressure, with Japan’s Nikkei 225 skidding 2.8%. China’s Shanghai Composite Index slipped 0.3%.

Write to Joe Wallace at joe.wallace@wsj.com and Gunjan Banerji at gunjan.banerji@wsj.com