NEW YORK (AP) – Banks and energy companies surged Wednesday and smaller companies made huge gains as stocks got back almost all the ground they lost the day before. Investors reversed course as they hoped Italy would be able to avoid a new round of elections after all.
Financial companies rallied as bond yields turned higher and energy companies rose along with U.S. crude oil, which busted out of a five-day losing streak. The shift came after Carlo Cottarelli, nominated to be Italy’s next prime minister, said there were “new possibilities” to form a government.
Stocks had plunged the previous day as investors expected gridlock to be resolved with new elections that could have turned into a yes-or-no referendum deciding whether Italy would continue to use the euro.
The S&P 500 index jumped 34.15 points, or 1.3 percent, to 2,724.01. The Dow Jones industrial average climbed 306.33 points, or 1.3 percent, to 24,667.78. The Nasdaq composite gained 65.86 points, or 0.9 percent, to 7,462.45.
While the S&P 500 and Nasdaq recovered Tuesday’s losses and then some, smaller and more U.S.-focused companies did ever better as investors continued to worry about trade. Small companies finished with minor losses Tuesday, and on Wednesday they made even bigger gains than larger multinationals did. The Russell 2000 index surged 24.34 points, or 1.5 percent, and closed at a record high of 1,647.99.
The Chinese government criticized the U.S., which had renewed a threat to raise duties on some imports from China. At the same time, officials from the U.S. and European Union held talks on the tariffs the Trump administration has proposed on European steel and aluminum.
Italy’s FTSE MIB stock index climbed 2.1 percent after a 2.7 percent drop a day earlier. Prices for Italian government bonds also rose, sending yields down following a huge surge the day before.
The euro rose to $1.1648 from $1.1531, which was its lowest level in almost a year. The dollar rose to 108.85 yen from 108.24 yen.
Germany’s DAX climbed 0.9 percent while the FTSE 100 index in Britain rose 0.7 percent. The CAC 40 in France lost 0.2 percent.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.84 percent from 2.79 percent. Interest rates rose and bank stocks recovered about half of their losses from Tuesday. When rates rise, banks can make more money on mortgages and other types of loans.
Energy companies rose as U.S. crude oil climbed 2.2 percent to $68.21 per barrel in New York. Brent crude, used to price international oils, added 2.8 percent to $77.50 a barrel in London.
Exxon Mobil rose 3.9 percent to $81.50. that was its biggest one-day gain since September 2016.
Oil prices fell 7.6 percent in five days following reports OPEC countries and Russia might start producing more oil soon. Those countries cut production at the start of 2017, which helped take U.S. crude from about $50 a barrel in late 2016 to more than $70 this month. They had agreed to keep production at its current levels until the end of this year, but upheaval in Venezuela and new sanctions on Iran could change their plans.
Gold rose 0.2 percent to $1,301.50 an ounce. Silver added 1 percent to $16.54 an ounce. Copper gained 0.2 percent to $3.07 a pound.