Wall Street rebounds after Hong Kong stocks suffer their worst day since 2008

NEW YORK —  U.S. stocks rebounded Tuesday after falling oil prices released some of the pressure that had built up on the market.

The Standard & Poor’s 500 rallied 1% to claw back all of its loss from the day before. The Dow Jones industrial average rose 126 points, or 0.3%, and likewise neared its record set last week, while the Nasdaq composite led the way with a 1.4% rally.

Wall Street held firm even though stock markets around the world sank after scary swings in China, as euphoria about possible stimulus for the world’s second-largest economy gave way to disappointment. Stocks tumbled 9.4% in Hong Kong, marking their worst day since the 2008 global financial crisis.

Helping to support Wall Street was a sharp drawdown in oil prices. They gave back some of the big recent gains they made on worries that worsening tensions in the Middle East could ultimately lead to disruptions in the flow of oil.

A barrel of Brent crude, the international standard, fell 4.6% to $77.18 for its first loss in a week and a half. A barrel of benchmark U.S. crude, meanwhile, eased 4.6% to $73.57.

That also helped level off the pressure on the stock market from the bond market. Treasury yields eased a bit, a day after they shot to their highest levels since the summer.

The 10-year Treasury yield edged down to 4.02% from 4.03% late Monday. The two-year yield, which more closely tracks expectations for what the Federal Reserve will do with overnight interest rates, slipped to 3.96%, from 3.99% late Monday, though it’s still near its highest level since August.

When Treasurys are paying higher yields, investors generally become less willing to pay very high prices for stocks and other investments. And Treasury yields had been storming higher over the last week after a suite of reports showing the U.S. economy remains healthier than expected.

Such reports, including one last week showing stronger hiring by U.S. employers than forecast, raise hopes that the economy will avoid a recession. But they also force traders to ratchet back expectations for how much the Federal Reserve will cut interest rates now that it has widened its focus to include keeping the economy humming instead of just fighting high inflation.

Traders have abandoned expectations for the Fed to cut its main interest rate by a larger-than-usual half of a percentage point at its next meeting, for example. Instead, they’re largely betting on a traditional-size cut of a quarter of a percentage point, according to data from CME Group. Some are even calling for the possibility the Fed could keep its main rate steady in November.

High Treasury yields put the most pressure on stocks seen as the most expensive, and that puts the spotlight on the Big Tech stocks that have led the market for most of the last few years.

On Tuesday, all of the major tech stocks that have collectively come to be called the “Magnificent Seven” rose. Nvidia led the way with a gain of 4% and was the strongest single force pushing upward on the S&P 500.

PepsiCo climbed 1.9% after delivering stronger profit for the latest quarter than analysts expected, though its revenue fell short.

Chief Executive Ramon Laguarta also said the company now expects a “low single-digit” increase in an important measure of revenue for the year after it had earlier forecast growth of about 4%. U.S. consumers continue to pull back on buying snacks and drinks after years of price increases.

On the losing end of Wall Street were oil-and-gas companies, which gave back some of their big recent gains driven by the last week’s jump in crude prices. Chevron fell 1.6% and was one of the main reasons the Dow lagged behind other indexes.

All told, the S&P 500 rose 55.19 points to 5,751.13. The Dow added 126.13 points to close at 42,080.37, and the Nasdaq jumped 259.01 points to 18,182.92.

In stock markets abroad, trading in mainland China reopened after a national holiday. Before, indexes in Shanghai and Shenzhen had surged on hopes for stimulus from the government and the central bank meant to prop up the economy’s flagging growth.

On Tuesday, China’s economic planning agency outlined details of measures aimed at boosting the economy, but it refrained from major spending initiatives. That helped lead to the 9.4% drop for the Hang Seng index in Hong Kong.

In Shanghai, where the market had been closed as Hong Kong ran higher over the last week, stocks rose 4.6% after their reopening.

The disappointment in China had worldwide effects, knocking down stocks of companies in Europe, the United States and elsewhere that do lots of business in and around China. Estee Lauder fell 2.2%, for example, while Wynn Resorts lost 3.3%.

Choe writes for the Associated Press. AP writers Matt Ott, Elaine Kurtenbach and Zen Soo contributed to this report.