Rosalind Evans
Thursday saw a slight uplift in U.S. stocks as numerous companies reported better-than-anticipated profits, while yields rose in response to a Federal Reserve official’s comments suggesting the termination of interest-rate hikes might not be as imminent as Wall Street anticipated.
The S&P 500 noted a 0.4% increase in morning trading, bolstered by hopes of the U.S. government avoiding a catastrophic debt default, a sentiment that fueled a rally the previous day. The Dow Jones Industrial Average witnessed a minor increase, up by 14 points (or just under 0.1%) at 33,435 by 10:30 a.m. Eastern Time. The Nasdaq composite rose by 0.8%.
Wall Street was lifted by Walmart’s shares, which rose by 2.1% following the announcement of stronger-than-expected quarterly results. The retail giant also increased its annual financial forecast, although it noted continued spending caution among customers.
Bath & Body Works, another retailer, surged 8.8% on reporting impressive revenue and earnings for the recent quarter. The retail industry has been closely watched as robust consumer spending has supported the slowing economy, staving off a potential recession.
Take-Two Interactive, a video game company, jumped 11.7% following its revenue forecast for fiscal 2025, fueling speculations around the release of Grand Theft Auto VI.
Despite many economic concerns, the stock market has displayed remarkable resilience since early April, primarily driven by optimism that the Fed might moderate its rate hikes, which have been crucial in controlling inflation but risk-inducing a recession and lowering prices in financial markets.
Most investors were expecting the Fed to hit a pause on the rate hikes in its June meeting; however, remarks from Dallas Fed President Lorie Logan during her speech for the Texas Bankers Association tempered these expectations.
Logan commented that upcoming data might justify skipping a meeting, however, as of now, it was premature to consider it.
Subsequently, Treasury yields rose as traders augmented their bets on a Fed rate hike in June, although the consensus still anticipates a pause.
The 10-year Treasury yield climbed to 3.63% from 3.57% late on Wednesday, while the 2-year yield, more sensitive to Fed expectations, increased to 4.22% from 4.16%.
The already elevated rates have negatively affected large sections of the economy, contributing to three of the most significant U.S. bank failures since March. Economic reports released on Thursday offered a mixed picture.
One positive development was fewer workers applying for unemployment benefits than projected last week, implying a still robust job market. However, this could also induce inflationary pressures, something the Fed has been actively trying to curtail by raising its benchmark interest rate to levels unseen since 2007.
According to another report, manufacturing in the mid-Atlantic region continued to decline but less severely than economists had anticipated.
Cisco Systems’ stock oscillated between minor gains and losses after announcing better-than-expected quarterly results and an improved forecast for the upcoming quarter. Some investors may have been disillusioned due to concerns about lower growth in the next fiscal year. The stock was most recently up 0.2%.
Most S&P 500 companies have posted profits for the first quarter that surpassed analysts’ expectations. However, according to FactSet, they are predicted to report weaker earnings for a second consecutive quarter compared to the previous year.
Overseas stock markets followed Wall Street’s lead, with European and Asian indexes rising after Wednesday’s significant Wall Street rally. President Joe Biden expressed his confidence in agreeing with Republicans to raise the U.S. government’s borrowing limit.
This potential agreement could prevent Washington’s unprecedented default on its debt. Economists warn that if the government runs out of funds to settle its bills, which could happen as soon as June 1 without a deal, it could lead to disastrous consequences for the economy and financial markets.
Japan’s Nikkei 225 continued its strong performance in Asia, increasing by 1.6%, while Germany’s DAX in Europe rose by 1.1%.
U.S. stocks show resilience amidst economic worries, fueled by better-than-expected profits from several companies and cautious optimism about resolving the looming U.S. debt crisis. While the Federal Reserve’s interest-rate plans have investors on edge, it remains to be seen how these factors will influence Wall Street’s trajectory in the coming months.
