NEW YORK (AP) — Wall Street added a bit more Wednesday to its big rally from a day before.
The S&P 500 rose 7.18 points, or 0.2%, to 4,502.88. The Dow Jones Industrial Average gained 163.51, or 0.5%, to 34,991.21, and the Nasdaq composite edged up by 9.45, or 0.1%, to 14,103.84.
Target helped lead the market with a 17.8% jump after it reported much stronger profit for the latest quarter than analysts expected. But another big retailer, TJX, fell 3.3% 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 were 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 hikes to interest rates. That in turn bolstered hopes the Fed can actually pull off the balancing act of getting high inflation under control without causing a painful recession.
Halfway through November, the S&P 50 has already jumped 7.4%, which would make this its best month in a year if it does nothing else for two weeks.
Treasury yields rose Wednesday, 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 barrage of rate hikes.
The Fed has already 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, without overdoing it.
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 feed 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 climbed immediately after the release of the retail sales data and other economic reports. The two-year yield rose to 4.91% 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. That’s despite officials at the Fed saying that they will likely keep interest rates high for a while in order to ensure the battle is definitively won against inflation.
Strategists at Goldman Sachs are warning the market’s 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 jumped 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 gained 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.