Wall Street ends significantly higher on optimism ahead of key inflation report

  • CPI report is due Thursday before the clock
  • Bed, Bath & Beyond extends recent gains
  • Indexes: Dow up 0.8%, S&P 500 up 1.3%, Nasdaq up 1.8%

NEW YORK, Jan 11 (Reuters) – U.S. stocks ended sharply on Wednesday, with the S&P 500 and Nasdaq rising more than 1% each as investors were upbeat ahead of an inflation report that could give the Federal Reserve room to scale back its aggressive interest rate increases.

The much-anticipated report, due on Thursday, is expected by economists polled by Reuters to show that US consumer prices grew 6.5% year-on-year in December, moderating from a 7.1% rise in November.

Among sectors, real estate (.SPLRCR) and discretionary consumer (.SPLRCD) were today’s strongest priests, while Microsoft (MSFT.O) (AMZN.O) and other mega-cap growth names gave the S&P 500 its biggest boost.

The benchmark index has so far risen for 2023 after a significant decline last year. Hopes that the Fed could soon ease its aggressive tightening after raising the federal funds rate seven times in 2022 have fueled the market in recent sessions, although comments from some Fed officials have supported the view that the central bank should remain wary of raising interest rates to combat inflation.

“Investors expect us to be closer to a break than at any point last year,” said Jake Dollarhide, managing director of Longbow Asset Management in Tulsa, Oklahoma. He said it would be welcomed by the market.

Also, “anytime you have a down year, it’s not surprising a lot of times to have a turnaround at the start of the new year,” he said.

Dow Jones Industrial Average (.DJI) rose 268.91 points, or 0.8%, to 33,973.01, the S&P 500 (.SPX) rose 50.36 points or 1.28% to 3,969.61 and the Nasdaq Composite (.IXIC) added 189.04 points, or 1.76%, to 10,931.67.

Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly

Money market participants see a 75% chance the Fed will raise the benchmark interest rate by 25 basis points in February.

This week also marks the start of fourth-quarter earnings season for S&P 500 companies, with overall S&P 500 earnings expected to have declined year-over-year, according to IBES data from Refinitiv.

The biggest US banks, which start the season later this week, are expected to report lower quarterly earnings as the risk of a recession rises due to monetary tightening.

Goldman Sachs (GS.N) began laying off staff on Wednesday in a sweeping cost-cutting drive, a source familiar with the matter said. Shares in Goldman Sachs ended with 2 per cent.

Dealer Bed Bath & Beyond Inc (BBBY.O) sharply extended recent gains to end at 68.6% despite dismal quarterly resultswith some investors speculating that it could be a potential acquisition target.

Volume on US exchanges was 11.42 billion shares, compared to the 11 billion average for the entire session over the last 20 trading days.

Advancing issues outnumbered decliners on the NYSE by a ratio of 3.78 to 1; on the Nasdaq, a ratio of 2.25 to 1 favored advances.

S&P 500 posted 11 new 52-week highs and 1 new low; The Nasdaq Composite recorded 98 new highs and 20 new lows.

Reporting by Caroline Valetkevitch; Additional reporting by Shubham Batra and Amruta Khandekar in Bengaluru; Editing by Shounak Dasgupta and Grant McCool

Our standards: Thomson Reuters Trust Principles.

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