Dow on Track for Closing Record

The Dow Jones Industrial Average rose 428 points, or 1.4%, to 31964 in afternoon trading, on track to set a closing record. The blue-chip index crossed 32000 for the first time intraday earlier in the session. The S&P 500 gained 1.1% and the tech-heavy Nasdaq Composite added 0.7%. The Russell 2000 small-cap index, meanwhile, was up 2%.

Two days of Mr. Powell’s reassurances have soothed the market’s nerves. The S&P 500 snapped a five-session losing streak Tuesday, while the Nasdaq had fallen in five of the past six trading sessions.

Speaking to the Senate Banking Committee, Mr. Powell reaffirmed his commitment to keeping easy-monetary policies unchanged for the foreseeable future and was generally dismissive of any inflation concerns. That eased investor concerns about rising interest rates and fears that an overheating economy would alter the Fed’s thinking.

“There was relief in the market that yields and inflation aren’t going to be as runaway as anticipated,” said Shawn Snyder, head of investment strategy at Citi U.S. Wealth Management.

Stock markets have wavered in recent days following a strong start to the year, with highflying tech companies leading declines. The Nasdaq had doubled from its lows last March, with companies like Tesla rising even further.

It isn’t at all surprising that investors chose now to lock in some of those profits, said LPL Financial strategist Jeff Buchbinder. “We’ve seen this in other bull markets coming off major bear-market lows. It makes total sense to take a breather.”

Investors said a rise in government bond yields, driven by improving growth prospects and rising inflation expectations, has accelerated a rotation out of the tech stocks that led markets higher during the pandemic, and into the stocks best placed to benefit from an end to lockdowns.

“This really is a function of economies reopening,” said Brian O’Reilly, head of market strategy at Mediolanum Investment Funds. “Bond yields are rising because of good vaccination rates in the U.S. and U.K. and it’s prompting a simple rotation away from everything that did well last year, the stay-at-home stocks, to the ones that didn’t, the go-outside stocks.”

“It’s a good story in some ways, in that the market is trying to price in that economies are going to reopen,” he added.

Though tech is usually viewed as one monolithic sector, the companies within it have been subject to the same growth/value debate as the rest of the market, said Michael Greenly, a senior portfolio manager at UBS Private Wealth Management.

While the big tech names have fallen, more cyclically focused companies, like semiconductors, have been doing well, he said. The PHLX Semiconductor Index, for instance, is up more than 12% so far this year, outpacing the Nasdaq Composite’s 5% gain.

“You’re seeing a change in leadership in tech,” he said.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, has risen to its highest level in a year this week. Earlier on Wednesday, it rose above 1.42%, but most recently was at 1.389%, up from 1.363% Tuesday.

While the Fed has stuck to the same message since the pandemic hit, the strength of the recovery could prompt it to change course sooner than many investors have been expecting, said Paul O’Connor, head of multiasset management at Janus Henderson Investors.

“Markets are expecting that to be a 2022 story, however we are seeing sizable upgrades to U.S. GDP. Somewhere in the middle of this year the discussion around tapering is going to have to take place,” he said.

The latest batch of earnings reports will be in focus Wednesday. Nvidia, Booking Holdings and L Brands will release their reports after markets close.

PRA Health Sciences jumped 18% after Dublin-based Icon said it would buy the company in a deal worth roughly $12 billion.

Square fell 6.5% after the payments company reported a lower fourth-quarter profit late Tuesday.

On the economic front, new homes sales rose 19% annualized in January, faster than expected. One concern, though, is that rising lumber prices could force home prices higher, offsetting low mortgage rates.

Bitcoin rose 6.9% to $49,103 after falling 13% Tuesday. Other cryptocurrencies that declined Tuesday, such as ether, also gained.

Tesla rose 4.3%. The company’s share price has fluctuated along with bitcoin in recent days after the electric-vehicle maker said it had bought $1.5 billion of the cryptocurrency.

Overseas, the pan-continental Stoxx Europe 600 index rose 0.5%. Asia-Pacific indexes slipped. The biggest losses were in Hong Kong, where the city’s government moved to capitalize on booming markets by increasing a levy on share trading. Hong Kong’s benchmark Hang Seng Index dropped 3%.

Andy Maynard, head of equities at China Renaissance Securities, said investors were getting uneasy about expensive valuations after rapid run-ups in mainland Chinese and Hong Kong markets, particularly against a backdrop of rising bond yields. In a potential sign of growing caution, he noted: “You don’t see institutions buying on the dip.”

—Xie Yu and Caitlin Ostroff contributed to this article.

Write to Will Horner at William.Horner@wsj.com and Paul Vigna at paul.vigna@wsj.com