Wall Street gains ground, heading higher for the week

Stocks rose on Wall Street on Wednesday, pushing major indexes into the green for the week, as investors were cheered by signs that consumers remain resilient as well as strong corporate earnings reports.

The S&P 500 was up 1.4% at 12:40 p.m. east. The Dow Jones Industrial Average rose 493 points, or 1.5 percent, to 33,343 and the Nasdaq rose 1.5 percent.

Consumer confidence remains surprisingly strong, despite inflation squeezing household budgets. The Conference Board reported on Wednesday that its consumer confidence index rose to 108.3 in December, from 101.4 in November. It’s a sharp recovery, pushing the index to its highest level since April.

“The news hit a kind of sweet spot for the Federal Reserve,” said Megan Hornman, chief investment officer at Verdence Capital Management. “The consumer remains relatively resilient.”

At the same time, investors were cheered by some strong corporate earnings reports. Nike jumped 13.6% after reporting results that beat analysts’ estimates. FedEx rose 4.5% after reporting strong earnings. Energy stocks gained ground as U.S. crude oil prices rose 2.5%. Hess gained 2.8%

Bond yields were mixed. The yield on the 10-year note, which influences mortgage rates, remained at 3.69% as of late Tuesday.

Fighting inflation

Despite consumer optimism, investors continue to face expectations that interest rates will remain high for longer than previously thought as the Federal Reserve continues to doggedly battle tepid inflation. The federal funds rate ranging from 4.25% to 4.5%, the highest level in 15 years. Fed policymakers forecast the central bank rate to reach a range of 5% to 5.25% by the end of 2023. Their forecast does not call for a rate cut before 2024.

Wall Street worries that central banks will go too far in raising interest rates and eventually slow the economy so much that it slips into recession. This has left investors narrowly focused on economic updates to get a better idea of ​​how businesses and consumers are dealing with inflation.

“This is likely to be the trend of the broader economy in 2023: Some relief from the inflation that has hit the US since the pandemic, while economic activity softens further in response to high interest rates,” noted Bill Adams, chief economist at Comerica Bank . An email message.

Sales of previously occupied homes fell more than economists expected in November. The housing market has been a strong sector of the economy, but has moderated rising mortgage rates;. This has made an already tight housing market even more difficult for prospective home buyers.

Consumer spending, along with the labor market, was another strong area of ​​the economy that helped protect it from slipping into recession. Wall Street hopes the Fed can win the battle against inflation while keeping the economy growing, what economists call a “soft landing.” The latest consumer confidence report raises hopes for that result in 2023, Horneman said.

The government will release a closely watched monthly snapshot of consumer spending on Friday, the personal consumption expenditure price index for November. The report is watched by the Fed as a barometer of inflation, which is falling, but at a relatively slow pace. Economists expect the report to show that inflation continued to ease in November.

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