U.S. Stocks Rise, Extending Last Week’s Gains

Nike

advanced 3.3% after the big apparel maker reported revenue that beat analysts’ expectations. Financial and technology stocks also gained.

The stock benchmarks closed lower on Monday after Federal Reserve Chairman

Jerome Powell

said the central bank was prepared to raise interest rates in half-percentage-point steps if needed to tamp down inflation. By Tuesday morning, though, investors were interpreting Mr. Powell’s comments as a vote of confidence in the economy’s outlook.

“The message that came out of the [Fed] meeting last week is that they are going to be tightening [monetary policy] but the U.S. economy is resilient enough to withstand that,” said

Huw Roberts,

head of analytics at Quant Insight, a data analytics firm. “The equity market chose to emphasize the economic resilience portion.”

Tuesday saw gains from communications and technology stocks battered earlier this year, as well as shares of banks and other financial firms poised to benefit from higher long-term interest rates. Oil prices rose, then fell, before reversing yet again.

“There are so many uncertainties,” said

John Lynch,

chief investment officer for Comerica Wealth Management. “But looking at the market’s leadership today, it’s a mixed bag. The equity market appears tame, but the bond market doesn’t. The market seems as confused as anyone else.”

In the U.S. Treasury market, a selloff in government bonds intensified, sending the yield on the 10-year U.S. Treasury note climbing to 2.379%, from 2.315% Monday. The yield on the benchmark note is now around its highest level since May 2019, before the Covid-19 pandemic upended financial markets. Yields rise when bond prices decline. 

In the energy markets, futures for Brent crude, the international benchmark, rose 0.7% to $116.42 a barrel. Last week, Brent prices fell below $100 before reversing. Support for a European Union-wide ban on the purchase of Russian oil is growing inside the bloc, raising the possibility of continued volatility. 

Stocks, bonds, commodities and currencies have been whipsawed by volatility for the past month as investors have tried to assess the economic fallout from Russia’s war in Ukraine. Many investors now fear that the war could keep inflation sustained and stunt economic growth in the U.S. and Europe.

This week, however, investors were thrown a new curveball when Mr. Powell, speaking Monday, struck a tougher tone than the one he used when the Fed lifted interest rates from near zero last week. He stressed the uncertainty facing the central bank and said the Fed would shift into a more restrictive stance if needed.

The comments prompted some analysts and investors to reassess interest-rate expectations. Economists at Goldman Sachs said in a note after Mr. Powell’s remarks that they now expect half-percentage-point increases at both of the Fed’s May and June meetings. That compares with expectations of quarter-percentage-point increases at both of the meetings previously.

Monday’s comments heightened investor fears that the Fed could be tightening more quickly just as the economy is slowing. “The big variable now is the economic growth side of things,” Mr. Roberts said. 

Many investors are keeping a close watch on the so-called yield curve, which measures the spread between short- and long-term rates and is often seen as a strong indicator of sentiment about the prospects for economic growth. Recently, the gap between yields on shorter-term and longer-term U.S. Treasury bonds has been shrinking, stirring anxieties that the bond market is close to signaling a potential recession. 

The two-year Treasury yield—which is especially sensitive to changes in monetary policy—climbed to 2.166% Tuesday, from 2.132% Monday. 

Investors on Tuesday morning were parsing data from the Federal Reserve Bank of Richmond showing that manufacturing activity in the U.S. central Atlantic region rebounded in March after growing marginally in February.  

Shares of banks rose, tracking similar moves in Europe. Financial stocks helped lead the S&P 500’s gains, with the sector rising about 1.6%.

Wells Fargo

jumped 4.4%, while Signature Bank rose 3.8%. In Europe,

Société Générale

advanced 1.4% and

Deutsche Bank

added 5.6%. 

“The yield curve probably steepens today,” said

Jack Ablin,

chief investment officer at Cresset Capital. “It’s good for banks, and perhaps more optimistic about the economy.”

Nike’s move made it among the bigger advancers. Communications and technology stocks also gained.

Etsy

rose 5.6%, while

Match Group

jumped 5.2%.

Amazon.com

was up more than 2%, rising for a sixth consecutive day, according to Dow Jones Market Data; it is up more than 16% during that time.

“Nike is the ultimate global company, as they sell and source all over the world,” Mr. Ablin said. “It’s a great barometer, and they assuaged a lot of investors’ concerns.”

Shares of

Okta

fell 3.5% after a hacking group posted screenshots purporting to show that it had gained access to Okta.com’s administrator and other systems. The company said Tuesday that a preliminary investigation found no evidence of any malicious activity, adding that the screenshots were most likely related to a January security incident.

Bitcoin rose about 3.6% from its 5 p.m. ET level Monday to trade around $42,685. The price of the cryptocurrency has swung sharply within the past month but has largely traded above $40,000 since the middle of last week.

In Europe, the pan-continental Stoxx Europe 600 increased 0.9%, rising for a fifth consecutive session. 

In Asia, Hong Kong’s

Hang Seng

gained about 3.2%, while Japan’s Nikkei 225 rose 1.5%. China’s Shanghai Composite advanced 0.2%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Justin Baer at justin.baer@wsj.com