Wednesday's Wall Street rally on junk bonds, and a renewed interest in initial public offerings, is spurring hope that investors are feeling more optimistic about the economy and willing to take on more risk.
The high-yield, or "junk," bond market had tumbled along with stocks last year, pushing yields above 20 percent and making it nearly impossible for lower-rated companies to shore up their finances, according to a recent report from the Wall Street Journal. However, the newspaper notes that on Wednesday, investors snapped up more than $2.7 billion in junk bonds.
The late-day surge lifted the Dow Jones Industrial Average 1.38 percent, or 109.44 points, to 8029.62.
The stock market, which is up 22.6 percent from its low earlier this year, also seems more receptive to new companies after shunning nearly all IPOs since last summer, the newspaper reports.
It says investors have been buoyed by modest signs of stabilization in the economy and increasing confidence the government is succeeding in plans to rescue the financial system.
Click here for the latest Beige Book, an anecdotal view of the economy in the Federal Reserve's 12 U.S. districts.