Wall Street is rising Thursday with hopes that the Federal Reserve may soon take it easier on its hikes to interest rates.
The S&P 500 was 0.9% higher in midday trading after a suite of reports painted a split U.S. economy. The job market remains remarkably solid, but manufacturing is weakening and shoppers of all kinds are feeling more pressure. Altogether, investors saw the data pushing the Fed to refrain from hiking rates at its next meeting in two weeks, which would be the first time that's happened in more than a year.
The Dow Jones Industrial Average was up 200 points, or 0.6%, at 33,109, as of a little past noon Eastern time. The Nasdaq composite was leading the market with a 1% gain. It's full of technology companies and other high-growth stocks that tend to benefit most from lower rates.
One positive for the market came late Wednesday when the House of Representatives approved a deal to prevent a possibly catastrophic default on the U.S. government’s debt. But that was what Wall Street expected, and only a trip-up for the deal before it gets signed by President Joe Biden would likely cause big waves for stocks.
Markets are more concerned about whether the economy will fall into a recession before inflation recedes enough to convince the Federal Reserve to take it easier on interest rates.
Reports on Thursday gave a clouded view. One said that fewer workers applied for unemployment benefits last week than expected, while another suggested employers increased their payrolls last month by more than forecast.
Both those are good news for workers and for the overall economy, which has been slowing under the weight of much higher interest rates. But a strong job market could also keep pressure up on inflation, pushing the Fed to keep rates high. A more comprehensive report on hiring will arrive Friday morning.
On the flip side, manufacturing is continuing to get hit hard, in part by higher interest rates. A report from the Institute for Supply Management said manufacturing shrank for a seventh straight month in May. The contraction was worse than both the prior month and what economists expected.
Following the reports, traders were largely betting on the Fed to hold rates steady at its next meeting in two weeks. That would be the first time in more than a year that it hasn’t hiked rates, and it’s something a Fed official a day earlier hinted may happen.
After that, traders are split on whether the Fed will follow up with another hike to rates at its next meeting in July. That's key because high rates work to lower inflation by slowing the economy and hurting prices for stocks and other investments.
Tech and other high-growth stocks tend to get hit hardest by higher rates, and several Big Tech companies were leading the way higher on Wall Street.
Apple, Amazon and Meta Platforms all rose at least 1.5%, and their movements carry extra weight on the S&P 500 and other indexes because they're some of the most valuable on Wall Street.
So far, the economy has held up despite a long list of worries because of a still-strong job market and resilient spending by consumers. But reports from several retailers are showing shoppers feeling more pressure, all the way across the income spectrum.
Dollar General dropped 19.7% after it reported weaker profit and revenue for the latest quarter than analysts expected. It said the economic environment has been more challenging than it expected, and it cut its financial forecasts for the full year. It tends to cater to lower income households.
Macy's, which also owns Bloomingdale's stores, fell 1% after it slashed expectations for the year and fell short on sales and profit in the first quarter. It said shoppers began to pull back starting in March. That trend seems to be afflicting retailers across the spectrum.
Nordstrom rose 1.8% after reporting a surprise profit for the latest quarter. But it also said its customers, which include many upper-income households, were also feeling pressure.
“With the high-end customer, I guess we would say they’re pretty resilient, but they’re also cautious,” CEO Erik Nordstrom told analysts in a conference call late Wednesday. “And we’re seeing that really across the board, that caution.”
Some of the enthusiasm surrounding Wall Street's frenzy around artificial intelligence also cooled.
C3.ai gave a forecast for revenue this upcoming fiscal year that failed to wow Wall Street like Nvidia’s did last week. C3.ai said it expects to make between $295 million and $320 million, versus analysts’ expectations of roughly $317 million.
C3.ai tumbled 11.4%, though it’s still up more than 210% so far this year. Nvidia rose 4.6%.
On the winning end was Hormel Foods, which rose 5% after reporting stronger profit for the latest quarter than expected. Its brands include Skippy, Spam and Applegate meats.
In the bond market, the yield on the 10-year Treasury fell to 3.61% from 3.65% late Wednesday. It helps set rates for mortgages and other loans that influence the economy’s strength.
The two-year Treasury yield, which moves more on expectations for the Fed, fell to 4.36% from 4.40%.
