Stock market today: S&P 500 and Nasdaq head toward records following inflation report

NEW YORK (AP) — Wall Street's last winning month is headed toward a strong finish as U.S. stocks surge toward record highs.

The S&P 500 rose 0.5% in early trading and was on track to surpass its record set last week. The Dow Jones Industrial Average was up 55 points, or 0.1%, as of 9:40 a.m. ET. The Nasdaq composite rose 0.8% and once again flirted with its record set in 2021.

The bond market was relatively quiet, with yields declining a bit, after a closely watched inflation report showed prices across the country rose exactly as expected last month. One concern on Wall Street had been that inflation data would show an uncomfortable reacceleration. Previous reports had shown that prices rose more than expected in January at the consumer and wholesale levels.

"While inflation was higher than it has been in a long time, it may be more of a flash of a moment than the start of something worse," said Brian Jacobsen, chief economist at Annex Wealth Management.

Wednesday's report kept intact hopes that the Federal Reserve will begin cutting interest rates in June. Such a move would ease pressure on the economy and boost investment prices, and the Federal Reserve has already indicated several cuts could come this year.

The Federal Reserve's main interest rate is at its highest level since 2001 in hopes of reducing inflation by dragging down the economy through higher mortgage and credit card payments.

However, rate easing would come only if the Federal Reserve sees more convincing data that inflation is heading sustainably toward its 2% target. Hopes of upcoming rate cuts helped fuel the big U.S. stock market rally in late October, and the S&P 500 is poised to close out its fourth consecutive month of gains.

More recently, traders have been delaying forecasts for when the Federal Reserve might start cutting rates. A series of reports showing the economy remains stronger than expected have displaced March expectations. On Thursday, another report showed that fewer American workers filed for unemployment benefits last week than economists expected. It's the latest sign of a remarkably resilient labor market.

Meanwhile, the hope is that a strong economy will boost profit growth for U.S. companies, even if that means a delay in rate cuts.

Salesforce.com became one of the latest companies to report better earnings for the latest quarter than analysts expected late Wednesday. The customer resource management software company also said it plans to start paying a quarterly dividend to its investors, but also gave a revenue forecast for next year that was slightly below analyst expectations. Its shares fell 1.3%.

Best Buy jumped 6% after reporting better-than-expected earnings and revenue. The retailer also said it is increasing its dividend and its paying membership base is growing.

Hormel Foods also reported higher-than-expected profits and revenue. It cited broad-based growth across all of its brands, including Skippy peanuts, Chi-Chi's sauce and Corn Nuts snacks. Its shares rose 16.2%.

They helped offset a 5.9% drop for Bath & Body Works. The seller of fragrances, body lotions and three-wick candles reported better-than-expected profits, helped by a strong holiday season, but said sales could weaken next year.

Although it nearly doubled analysts' fourth-quarter earnings projections, cloud computing company Snowflake fell 19.3% after a surprise announcement that CEO Frank Slootman would retire effective immediately. Slootman will be replaced by Sridhar Ramaswamy.

In the bond market, the 10-year Treasury yield fell to 4.25% from 4.27% late Wednesday.

The two-year yield, which more closely tracks the Federal Reserve's expectations, fell to 4.64% from 4.65%. It had been close to 4.70% shortly before the release of the morning inflation data.

In foreign stock markets the indices were mixed.

Tokyo's Nikkei 225 fell 0.1% after data showed factory production fell in January at the fastest pace since May 2020, although retail sales were stronger than expected.

Hong Kong's Hang Seng fell 0.2%, while Shanghai stocks rose 1.9%. The smaller index in Shenzhen rose further after regulators issued new measures to support markets, including closer supervision of financial derivatives.

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AP Business writers Matt Ott and Elaine Kurtenbach contributed.

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