Wall Street is ticking higher Wednesday and adding a bit more to its big rally from a day before. The S&P 500 was up 0.2% in morning trading. The Dow Jones Industrial Average was up 85 points, or 0.2%, as of 10 a.m. Eastern time, and the Nasdaq composite was 0.2% higher.
Quick Read
- Wall Street Gains: U.S. stock markets saw moderate gains, with the S&P 500 up by 0.2%, Dow Jones Industrial Average rising by 85 points (0.2%), and the Nasdaq composite increasing by 0.2% in morning trading.
- Retail Sector Performance: Retailers showed mixed results. Target’s stock surged 17.7% after reporting a strong quarterly profit, exceeding analyst expectations. Conversely, TJX Companies saw a 4% decline following a lower-than-expected profit forecast for the holiday season.
- Inflation and Interest Rates Impact: Following an encouraging report on inflation that raised hopes of a halt in the Federal Reserve’s interest rate hikes, Wall Street experienced its best day since April. Investor optimism grew with the possibility of easing interest rate increases.
- Treasury Yields: The 10-year Treasury yield rose to 4.53% from 4.45%, slightly pressuring financial markets. This increase retraced some of the previous day’s significant declines that had contributed to the stock market rally.
- Wholesale Prices Report: A report showed a 1.3% year-over-year increase in wholesale prices in October, with a surprising drop from September. This data fueled hopes of cooling inflation and a potential pause in the Fed’s rate hikes.
- Federal Reserve’s Rate Hikes: The Fed has raised its main interest rate to its highest level since 2001 in an effort to combat inflation, causing concerns about a potential recession.
- Retail Sales Report: U.S. retail sales in October fell by 0.1% from September, better than the 0.3% drop forecasted by economists. This indicates a resilient economy but also raises concerns about continued inflationary pressures.
- Bond Market Volatility: The bond market, particularly sensitive to interest rate changes, has been a key driver of Wall Street’s fluctuations. Higher yields negatively impact investment prices.
- Rate Cut Expectations: Traders anticipate the Fed might start reducing rates as early as summer, following recent positive inflation data.
- Global Market Reactions: Asian markets rallied, with significant gains in Hong Kong, Japan, and South Korea, influenced by Wall Street’s performance. European stocks also rose, though by smaller margins.
- Economic Outlook: Reports indicate a contraction in Japan’s economy and stable but slowing indicators in China’s economy. Goldman Sachs strategists warn that expectations for rate cuts by central banks might be premature and overly optimistic.
The Associated Press has the story:
Wall Street tacks a bit more onto its big rally from the day before
Newslooks- NEW YORK (AP)
Wall Street is ticking higher Wednesday and adding a bit more to its big rally from a day before. The S&P 500 was up 0.2% in morning trading. The Dow Jones Industrial Average was up 85 points, or 0.2%, as of 10 a.m. Eastern time, and the Nasdaq composite was 0.2% higher.
Target was helping to lead the market with a 17.7% jump after it reported much stronger profit for the latest quarter than analysts expected. But another big retailer, TJX, fell 4% after the parent company of T.J. Maxx and Marshalls gave a profit forecast for the upcoming holiday shopping season that fell short of analysts’ estimates.
Wall Street’s overall moves are more tentative coming off its best day since April, when an encouraging report on inflation boosted investors’ hopes that the Federal Reserve may finally be done with its market-crunching hikes to interest rates.
Treasury yields rose, retracing a bit of the steep drops from the day before that had helped stocks to rally so much. The yield on the 10-year Treasury climbed to 4.53% from 4.45% late Tuesday, adding some pressure onto financial markets.
Another report on inflation Wednesday came in lower than expected. Prices at the wholesale level were 1.3% higher in October than a year earlier, and they surprisingly fell from September’s levels. That breathed more life into hopes that inflation is indeed cooling enough for the Fed to halt its blizzard of rate hikes.
The Fed has yanked its main interest rate to its highest level since 2001, up from virtually zero early last year. It’s hoping to slow the economy and hurt investment prices just enough to drive high inflation lower, but not so much as to cause a painful recession.
But a separate report on sales at U.S. retailers released Wednesday morning “complicates the picture,” according to Chris Larkin, managing director at E-Trade from Morgan Stanley.
Sales fell 0.1% in October from September, holding up better than the 0.3% drop forecast by economists. Stronger-than-expected sales at U.S. retailers is an indicator of a healthier economy, which is important given worries still exist about a possible recession. But they could also be feeding into upward pressure on inflation, which could get the Fed nervous about interest rates.
The yield on the two-year Treasury, which tends to track expectations for the Fed, and other yields jumped immediately after the release of the retail sales data and other economic reports. The two-year yield climbed to 4.90% from 4.84% late Tuesday.
The bond market has been at the center of Wall Street’s sharp swings because higher rates and yields hurt prices for all kinds of investments.
That’s had investors anxiously waiting for when the Fed could stop its torrent of hikes to rates and, perhaps more importantly, begin cutting them. Such cuts can act like steroids for markets, goosing investment prices and providing more oxygen for the financial system.
Traders on Wall Street have built expectations that the Fed could begin cutting rates as soon as the summer following the recently encouraging data on inflation.
But strategists at Goldman Sachs are warning expectations for rate cuts by major central banks around the world are “too large and too early,” while adding that even if rates are heading lower, they will not be low like they were before.
The strategists led by Praveen Korapaty are looking for U.S. economic growth to slow from its strong pace now, but not to fall in a recession, while inflation eases back towards the Fed’s target.
In stock markets abroad, indexes rallied sharply in Asia after momentum from Wall Street’s big rally Wednesday headed westward. Hong Kong’s Hang Seng surged 3.9%, Japan’s Nikkei 225 jumped 2.5% and South Korea’s Kospi rose 2.2%.
Reports showed that Japan’s economy contracted during the summer. In the world’s second-largest economy, meanwhile, a report showed the Chinese economy is holding up even as some indicators have slowed.
Stocks were also higher in Europe, but by more modest amounts than in Asia.
