NEW YORK — Global equities regained ground on Wednesday after three sessions of losses, while the Japanese yen strengthened sharply and US Treasury yields eased as investors assessed the latest escalation in the conflict between the United States and Iran.
The rebound in stocks came despite renewed concern over the potential impact of the conflict on energy supplies. The US and Iran exchanged their largest barrage of attacks since July, raising fears that the seven-month-old war could widen and disrupt oil flows from the Middle East.
Wall Street led the recovery. The Dow Jones Industrial Average gained 295.07 points, or 0.56%, to 53,061.95. The S&P 500 rose 0.46% to 7,666.60, while the Nasdaq Composite added 0.45% to 26,217.83.
MSCI’s broad gauge of global stocks edged 0.14 points higher to 1,142.87 after falling for the previous three sessions. European shares were weaker, however, with the STOXX 600 slipping 0.24%.
Investors appeared to use the recent sell-off to rebuild positions in equities, even as geopolitical and monetary-policy risks remained. Rick Meckler, a partner at New Vernon, New Jersey-based Cherry Lane Investments, described the move as a modest relief rally following the market’s recent weakness.
“The (US) economy itself remains strong,” Meckler said, while noting the tension between stronger economic activity, higher interest rates and the competing attraction of bonds.
The yen was one of the session’s biggest market moves. It gained 0.79% to 158.92 against the dollar, although the immediate trigger for the advance was unclear. The currency had surrendered roughly half of the gains made after a rare joint intervention by the US and Japan at the end of July.
The latest strength in the yen also reflects changing expectations for the Bank of Japan. Traders are watching whether the central bank could raise interest rates sooner than previously anticipated as inflation pressures persist.
Hajime Takata, a hawkish member of the BOJ’s policy board, said on Wednesday that interest-rate increases should be carried out nimbly in response to inflation rather than according to a fixed six-month timetable.
Bond markets also steadied after a sharp rise in yields in recent sessions. The yield on the benchmark US 10-year Treasury note fell 0.2 basis point to 4.794%, after reaching 4.818% earlier in the session, its highest level since November 2023.
Japanese government bond yields remained above 3% for a second consecutive session after reaching a three-decade high earlier in the week.
The shift in rate expectations has become an important source of uncertainty for investors. Markets were pricing in roughly a two-thirds probability of a 25-basis-point Federal Reserve rate increase this month, up from 37% a week earlier, according to CME Group’s FedWatch tool. The Fed is due to meet on September 15-16.
Fresh US employment data will provide another test for those expectations. The ADP National Employment Report showed private-sector employment increased by 38,000 in August, below the 48,000 gain economists surveyed by Reuters had expected. July’s increase was revised upward to 46,000.
The official US jobs report, due Friday, is likely to be closely watched for evidence of whether the economy is retaining enough momentum to support tighter monetary policy.
Thomas Urano, co-chief investment officer at Sage Advisory in Austin, Texas, said the weaker ADP reading highlighted the difficulty facing policymakers as they weigh economic growth against inflation and financial conditions.
Oil markets reflected the competing forces at work. Brent crude futures settled 1% higher at $95.63 a barrel, while US West Texas Intermediate crude gained 0.9% to $91.01 as investors assessed the possibility of further disruption to regional energy supplies.
Gold, another asset closely watched during periods of geopolitical stress, rose 1.33% to $4,386.29 an ounce.
The conflict remains a central risk for markets. The latest exchange of attacks followed US strikes on Iran and Iranian retaliation against US targets in the region, reviving concern that a wider escalation could affect energy markets and complicate the outlook for inflation and interest rates.
Investors will also be watching forthcoming meetings of the European Central Bank and Bank of Japan as policymakers confront persistent inflation pressures and changing economic conditions.
