Stocks end higher on Wall Street; economic worries hit oil
Shares on Wall Street rebounded from an early plunge and closed higher on Monday, extending recent market gains as investors anticipate several updates from retailers this week.
The S&P 500 rose 0.4% after falling 0.5% at the start. The benchmark has risen for four straight weeks and is up 13.5% so far in the third quarter, though still lower for the year.
The Dow Jones Industrial Average rose 0.5% and the Nasdaq 0.6%. Small company stocks also rose, pushing the Russell 2000 Index up 0.2%.
The market got off to a bumpy start as traders reacted overnight to news that China’s central bank had lowered a key interest rate, acknowledging that more needed to be done to shore up its economy. The move is the latest warning to markets already nervous about record inflation and fears of recessions in the United States and elsewhere.
China is the world’s second largest consumer of crude oil, so the news weighed on energy prices. US crude oil prices fell 2.9% on concerns about the global economy and weighed heavily on energy stocks. Chevron fell 1.9%.
Treasury yields fell as a report showed manufacturing in New York state unexpectedly contracted. The 10-year Treasury yield, which banks use to set mortgage rates, fell to 2.79% from 2.83% on Friday evening.
Some major banks fell as bond yields fell. Capital One slipped 1.8%.
Yet all but two of the 11 S&P 500 sectors closed higher. Tech stocks, retailers and other companies that rely on direct consumer spending accounted for much of the gains. Visa increased 2.4% and Costco added 1.6%.
Moderna rose 3.3% after UK regulators cleared an updated version of its COVID-19 vaccine.
In total, the S&P 500 rose 16.99 points to 4,297.14. The Dow added 151.39 points to 33,912.44. The Nasdaq gained 80.87 points to 13,128.05. The Russell 2000 rose 4.73 points to 2,021.35.
The market’s choppy start to the week follows four straight weeks of gains for the benchmark S&P 500 on hopes inflation is peaking and the Federal Reserve may ease its aggressive interest rate hikes. The central bank raised short-term interest rates to help slow economic growth and calm the highest inflation in 40 years.
Wall Street fears that the Fed could apply the brakes too hard and send the economy into recession, and any signal that inflation could peak or retreat has helped ease some of those concerns.
Investors are also closely watching the impact of inflation on businesses and consumers. Spending has slowed and the economy as a whole has already contracted for two consecutive quarters. Several major retailers will give investors more details on how their businesses are holding up when they report earnings this week.
Home Depot and Walmart report results Tuesday, and Target results are due Wednesday. On July 26, the S&P 500 fell more than 1% after Walmart warned that inflation was hurting its customers’ purchasing power and said its second-quarter profit would be lower than previously expected.
Wall Street will get another glimpse into the health of the retail sector and consumer spending when the Commerce Department releases its July retail sales report on Wednesday. Economists polled by FactSet expect modest growth of 0.2% from June, when sales rose 1%. This increase largely reflects higher prices, particularly for gas. But it also showed that Americans are continuing to spend, providing crucial support to the economy, although some economists suggest it comes mainly from higher-income households.