Dow rises 110 pts as Treasury buybacks lower yields and Moderna stock surges

US stocks closed higher on Wednesday as falling Treasury yields improved risk appetite, while a sharp rally in Moderna shares boosted the healthcare sector.

The Dow Jones Industrial Average rose 0.22%, or 119.71 points, while the S&P 500 gained 0.22% and the Nasdaq Composite advanced 0.16%.

The gains moderated during the session after the major indexes had climbed more sharply earlier in the day.

The Dow had been up more than 300 points at its session high, while the S&P 500 and Nasdaq had gained as much as 0.7% and 0.6%, respectively.

The initial rally followed the US Treasury's announcement that it would at least double the size of its debt buyback operations targeting longer-term government bonds.

Treasury buybacks push yields lower

The increased buybacks will focus on Treasury securities with maturities between 10 and 30 years, including 20-year debt. The announcement helped reverse some of the recent increase in long-term borrowing costs.

The 30-year Treasury yield fell nine basis points to 5.195%, after reaching more than 5.33% in the previous session, its highest level in 19 years.

The 10-year Treasury yield declined more than five basis points to 4.653%.

Lower yields supported rate-sensitive stocks, with Lowe's gaining around 3% and Home Depot rising more than 2%.

However, investors remained cautious about the broader interest-rate outlook.

Federal Reserve minutes released Wednesday showed that several policymakers favored raising rates at the July meeting, while many said further tightening could be necessary if inflation failed to decline.

The Fed held its benchmark interest rate at 3.5% to 3.75% in July, with three officials dissenting in favor of a quarter-percentage-point increase.

Moderna leads healthcare sector higher

Moderna was among the biggest individual gainers, with its shares more than doubling and rising over 176% after the company reported positive late-stage trial results for a personalized mRNA cancer treatment developed with Merck.

The treatment met the trial's primary goal of reducing melanoma recurrence and its secondary goal of preventing the cancer from spreading. Merck shares also climbed more than 12%.

The Moderna rally lifted other healthcare stocks, including Novavax and US-listed shares of BioNTech.

The S&P 500 healthcare sector reached a record high and provided the biggest boost to the benchmark among its 11 major sectors.

Marvell Technology also gained, rising 9% after announcing an expanded relationship with Google related to custom AI chips. The company issued Alphabet a warrant to purchase up to $12.2 billion of Marvell shares.

Tech stocks face AI and rate pressures

Not all technology stocks benefited from the decline in yields. Broadcom and Advanced Micro Devices fell around 4%, while the Philadelphia semiconductor index also ended lower.

The declines followed a report that OpenAI's second-quarter results disappointed investors. Revenue increased 18% from the first quarter, but losses also widened.

Technology stocks remain sensitive to borrowing costs as companies continue to invest heavily in AI infrastructure. Rising yields had contributed to recent pressure on the sector, while Wednesday's Treasury action provided temporary relief.

Investors also continued to monitor global inflation and geopolitical risks. Brent crude futures ended higher as uncertainty surrounding the Middle East remained elevated, with conflicting statements over the status of shipping through the Strait of Hormuz.

Overall, the major US indexes ended modestly higher, although the retreat from their session highs indicated that investors remained cautious about the longer-term path for interest rates.