Stocks end higher on Wall Street as inflation report looms
NEW YORK (AP) — Stocks closed higher on Wall Street but remain largely stuck in a holding pattern ahead of potentially market-moving reports scheduled for later in the week. The S&P 500 rose 0.7% Tuesday after flipping between gains and losses. The Nasdaq rose 1% and the Dow added 0.6%. The next big marker for the market is likely Thursday’s update on how bad inflation was last month. A worse-than-expected reading could dash hopes on Wall Street that the Federal Reserve may stop its hikes to interest rates soon and perhaps even cut rates by the end of the year. Earnings reporting season kicks off Friday.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — Stocks are drifting higher on Wall Street Tuesday, largely stuck in a holding pattern ahead of some potentially market-moving reports scheduled for later in the week.
The S&P 500 was 0.5% higher in afternoon trading after flipping between small gains and losses through the day. The Dow Jones Industrial Average was up 96 points, or 0.3%, at 33,614, as of 2:25 p.m. Eastern time, and the Nasdaq composite was 0.7% higher.
The stock market has had a positive start to 2023 due to hopes that cooling inflation and a slowing economy may convince the Federal Reserve to ease off its markets-shaking hikes to interest rates earlier. The Fed since early last year has been raising rates at a furious pace in hopes of getting the nation’s painful inflation under control. Such moves risk causing a recession and drag on prices for investments.
Investors were hoping for some clues about where the Fed is heading from its chair, Jerome Powell, who made remarks at a forum in Stockholm on Tuesday. But he gave little news about rates.
The next big marker for the market is likely Thursday’s update on how bad inflation was last month at the consumer level. Economists expect it to show U.S. inflation slowed further to 6.5% from 7.1% in November and from a peak of more than 9% in the summer.
A worse-than-expected reading could dash the building hopes on Wall Street that the Fed may stop its hikes soon and perhaps even cut rates by the end of the year. Some investors see the economy successfully walking the tightrope of slowing enough to kill off high inflation but not so much as to cause a painful recession.
Past rate increases and high inflation have already hurt economic activity around the world, and the Fed has pledged to keep rates high for a while to ensure the job is done on inflation. It doesn’t envision any rate cuts until 2024.
The World Bank said Tuesday the global economy will come “perilously close” to a recession this year in its annual report.
It usually takes a while for rate hikes to be fully felt in the economy. That could push a recession off to the second half of the year, said Barry Bannister, chief equity strategist at Stifel. The global economy could also benefit from strengthening in China, as it removes restrictions meant to keep COVID-19 at bay but that also hurt its economy.
“You’re looking at a pretty good six months where things get better at the margins and then trouble starts to rear its head,” Bannister said.
In the meantime, big U.S. companies later this week will begin showing investors how much profit they made during the last three months of 2022. Hot inflation has been squeezing customers’ wallets and raising costs for businesses, threatening their earnings.
Macy’s and several businesses have already given warnings about their results for the fourth quarter of 2022 and into 2023.
Troubled home goods retailer Bed Bath & Beyond on Tuesday reported weaker revenue for its latest quarter than analysts expected, though the size of its loss wasn’t as bad as Wall Street forecast. Its stock rose 21% after it also announced more cost cuts as it tries to survive.
Job cuts are also continuing in tech-oriented companies, a notable soft spot in what’s otherwise been a healthy U.S. job market. The continuing collapse for crypto pushed Coinbase to say it’s laying off 20% of its workforce. The stock rose 9.2%.
Several big banks are on deck to report their results on Friday, including Bank of America and JPMorgan Chase. Delta Air Lines and UnitedHealth Group will also report results on Friday. Analysts are forecasting that this may mark the first year-over-year drop in earnings per share for S&P 500 companies since 2020.
Bond yields rose. The yield on the 10-year Treasury, which helps set mortgage rates, climbed to 3.61% from 3.53% late Monday.
European markets were lower and Asian markets closed mixed overnight. Crude oil prices rose.
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