NEW YORK: US stocks extended gains on Wednesday, as fresh inflation data supported views that the Federal Reserve may be done with raising interest rates, while Target surged on an upbeat holiday-quarter forecast.
Target’s shares surged 16.9%, on course for their biggest percentage gain in more than four years, as the big-box retailer forecast fourth-quarter profit largely above expectations on easing supply-chain costs.
The bright outlook lifted shares of other retailers including Macy’s and Kohl’s, while the S&P 500 consumer staples index, which houses Target, climbed 0.6%.
Data earlier showed the biggest decline in producer prices in three-and-a-half years in October on the back of cheaper gasoline, offering more evidence of easing price pressures.
A separate set showed retail sales fell less than expected in October, slipping 0.1% against forecasts of a 0.3% fall, according to economists polled by Reuters.
“If we’re thinking about reduced inflationary pressure going forward, an environment where the Fed can slow or even stop the rate increases and yet still see somewhat positive economic growth, we’ve had this kind of Goldilocks scenario unfold,” said Steve Wyett, chief investment strategist at BOK Financial.
“We’re in the most seasonally positive period for equity returns and that does give us some confidence that between now and the year end, there’s some room to move higher in equities.”
The benchmark S&P 500 and the tech-heavy Nasdaq posted their biggest daily percentage gains in more than six months on Tuesday, as softer-than-expected consumer prices data raised hopes that US interest rates may have peaked.
Money market traders have fully priced in the odds that the US central bank will keep rates steady in December, as per CME Group’s Fedwatch tool. They also see the first rate cut of the cycle to kick off in May 2024.
Wall Street’s gains on Wednesday were, however, tempered by losses in some megacap companies and retreat in the utilities sector.
“A little bit of consolidation is not unhealthy... the market has got to digest a pretty big move over the last two or three weeks,” Wyett said.
Focus will be on the meeting between US President Joe Biden and Chinese leader Xi Jinping for the first time in a year on Wednesday, for talks that may ease friction between the adversarial superpowers on military conflicts, drug-trafficking and artificial intelligence.
At 12:02 p.m. ET, the Dow Jones Industrial Average was up 113.92 points, or 0.33%, at 34,941.62, the S&P 500 was up 9.92 points, or 0.22%, at 4,505.62, and the Nasdaq Composite was up 27.06 points, or 0.19%, at 14,121.44.
Further aiding the mood, the US House of Representatives passed a temporary spending bill that would avert a government shutdown, with broad support from lawmakers from both parties.
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