Consumer stocks drove Wall Street higher on Tuesday as Walmart forecast a strong holiday quarter and monthly retail sales beat expectations, helping investors look past uncertainty over hawkish measures by the Federal Reserve.
Data showed retail sales rose in October as Americans appeared to have started holiday shopping early to avoid empty shelves amid supply chain concerns, giving the economy a lift at the start of the fourth quarter.
The S&P consumer discretionary sub index jumped 1.4% and was the best-performing S&P sector by midday. The S&P 500 retailing index rose 1.4% to a record high.
Walmart, the country's largest brick-and-mortar retailer, raised its annual sales and profit forecasts. But its shares fell 3.0% as supply chain woes hit its third-quarter margins.
Retailer Home Depot Inc jumped 5.9% to a record after beating quarterly same-store sales estimates.
Wall Street moves higher, rebounding from inflation scare
Industrial stocks also gained after data showed U.S. manufacturing output surged to a two-and-a-half year high in October.
"If the greatest fear for investors right now is some combination of hoarding, inflation and shortages, today's data - retail and manufacturing really pushes back and shows the complete opposite," said Mike Bailey, director of research at FBB Capital Partners in Bethesda, Maryland.
Retailers Target Corp, Macy's and Kohl’s are set to report earnings this week.
The positive data helped investors look past comments from St. Louis Federal Reserve President James Bullard, who called for a more hawkish stance by the central bank in response to rising inflation.
"If the Fed decreased their purchases then it would create the potential for a rate hike sooner than mid-next year but today's data doesn't lean in that direction," said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
Investors have also been fretting over President Joe Biden's pick for Federal Reserve chair as Chair Jerome Powell's term is set to end in February 2022.
Wall Street had fallen from record highs last week amid concerns over rising inflation and the prospect of slowing economic growth. Analysts at major Wall Street banks have also grown somewhat lukewarm on the S&P 500's prospects in 2022.
However, a Bank of America survey showed investors were keen on ending 2021 in a risk-on mood.
Wall Street extends record rally
At 12:00 p.m. ET, the Dow Jones Industrial Average was up 186.58 points, or 0.52%, at 36,274.03 and the S&P 500 was up 24.37 points, or 0.52%, at 4,707.17. The Nasdaq Composite was up 91.81 points, or 0.58%, at 15,945.66.
Nvidia rose 0.7% despite the UK ordering an in-depth probe of the chipmaker's planned $50 billion-plus acquisition of chip designer Arm.
Chipmaker Qualcomm Inc rose 3.2% after it said German automaker BMW will use its chips in its next generation of driver-assistance and self-driving systems.
U.S.-listed Chinese stocks and other China-exposed sectors rose on optimism over talks between President Biden and Chinese leader Xi Jinping.
Electric-car maker Tesla Inc rose 2.4%, even as CEO Elon Musk sold $930 million in shares. The stock had tumbled around 13% after Musk began selling shares last week.
JPMorgan Chase & Co also sued Tesla for $162.2 million over a breach of contract related to stock warrants.
Declining issues outnumbered advancers for a 1.01-to-1 ratio on the NYSE and for a 1.28-to-1 ratio on the Nasdaq.
The S&P index recorded 62 new 52-week highs and three new lows, while the Nasdaq recorded 102 new highs and 158 new lows.
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