Some of the largest US lenders reported higher earnings before the market opened. Shares of Bank of America rose 1.9% after the lender reported higher fourth-quarter profits, while shares of Morgan Stanley gained 2% on earnings that beat forecasts. US Bancorp fell nearly 7% after the bank holding company posted higher compensation costs. This earnings season, Goldman Sachs, JPMorgan Chase and Citigroup have also announced that they have paid out more in compensation.

Procter & Gamble said consumers were undeterred by rising prices, leading to higher revenues and a rise in the consumer goods company’s shares of around 4%.

Government bond prices rose slightly, pushing yields lower. Yields on benchmark 10-year Treasury notes fell to 1.861% from 1.866% on Tuesday, which was their highest level since January 2020. Yields on interest-rate-sensitive two-year Treasury notes fell to 1.020% vs. 1.038% on Tuesday.

The first weeks of the year were tumultuous. In January, many investors began to position themselves for a world that looks very different from last year. Interest rates are expected to start rising and some investors are positioning themselves for the Covid-19 pandemic to turn into an endemic.

Investors stepped up bets that the Federal Reserve and other major central banks will tighten monetary policy in the coming months, removing a pillar of support from the markets. Rising expectations for interest rate hikes follow evidence that the drivers of inflation have widened beyond the supply chain shock that fueled price rises for much of 2021.

Recent volatility is “Really all about inflation and central bank aggressiveness in countering it,” said Brian O’Reilly, head of market strategy at Mediolanum Asset Management, adding that inflation could also dampen economic growth by hitting the consumption. “Granted, the market is nervous right now.”

As a result, many investors have moved away from one of the hottest sectors in the market: technology. The Nasdaq Composite is down nearly 10% from its Tuesday high.

And there are signs that individual investors – a key force behind the 2021 stock market rally – are cooling off on technology, according to analysts at Vanda Research. Retail investors bought shares of financial and energy companies while their purchases of high-flying stocks like Advanced Micro Devices and Nvidia declined, Vanda said.

The S&P 500 value index outperformed its growth index by about 6.8 percentage points this month, on pace with the strongest monthly outperformance since December 2000, according to Dow Jones Market Data.

Some traders said that after an almost relentless run for financials at the start of the year, the sector was bound for a decline, as was the case on Wednesday.

“The flows we’ve seen in financials in the first few weeks of the year have been massive. In the short term, I don’t think it’s sustainable,” said RJ Grant, director of equity trading at KBW. “I think the finances have gone too far, too fast.”

The yield on Europe’s most closely watched government bonds turned positive for the first time since 2019. The yield on the 10-year German Bund hit 0.021% on Wednesday after trading in negative territory for more than 30 months . It then fell to 0.010%. UK ten-year yields, meanwhile, rose to their highest level since March 2019 after data showed inflation hit a 30-year high.

Oil prices rose again after hitting seven-year highs on Tuesday. The most active U.S. crude futures rose about 1% to $85.55 a barrel in the latest trades, extending a rally driven in part by the potential for supply disruptions in Russia and in the Middle-East.

Foreign stock markets were mixed after Tuesday’s selloff on Wall Street. The Stoxx Europe 600 rose 0.7% as gains in retail and resource stocks offset losses in food, beverage and insurance companies. Asian stocks were under pressure, with the Japanese Nikkei 225 slipping 2.8%. China’s Shanghai Composite Index fell 0.3%.

Write to Joe Wallace at joe.wallace@wsj.com and Gunjan Banerji at gunjan.banerji@wsj.com