Stocks

Wall Street rises as Target, Lowe's results point to consumer confidence

Reuters NEW YORK | Updated on August 22, 2019 Published on August 22, 2019

The S&P 500 posted 31 new 52-week highs and five new lows. File Photo   -  Bloomberg

Fed policymakers discussed possibility of 50 bp rate cut

Wall Street's main indexes rose on Wednesday as upbeat earnings from retailers pointed to strength in US consumer demand, and held gains after minutes from last month's Federal Reserve meeting showed policymakers had debated a more aggressive interest rate cut.

US stocks moved solidly higher following better-than-expected results from retailers Target Corp and Lowe's Cos Inc. Target shares surged 20.4 per cent after the big-box retailer raised its annual earnings forecast. Lowe's shares climbed 10.4 per cent after the home-improvement chain beat profit estimates.

Robust US consumer spending has helped stave off fears of an impending recession. Concerns about an economic slowdown rose as the yield curve between 2-year and 10-year Treasuries briefly inverted last week. Though the yield curve again briefly inverted on Wednesday, it had little impact on stocks this time around. “As long as we have the healthy environment in jobs that we have right now, it's going to be very difficult to shake people's confidence,” said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago. “At the end of the day, if people are employed, they're going to go out and spend some money.”

Minutes from the Fed's policy-setting meeting on July 30-31, when the Fed cut rates by 25 basis points, showed that policymakers debated cutting rates more aggressively. Some participants preferred a 50-basis-point cut, but the committee was united in wanting to avoid the appearance of being on a path to further rate cuts.

The Dow Jones Industrial Average rose 240.29 points, or 0.93 per cent, to 26,202.73, the S&P 500 gained 23.92 points, or 0.82 per cent, to 2,924.43 and the Nasdaq Composite added 71.65 points, or 0.90 per cent, to 8,020.21.

Fed Chair Jerome Powell is scheduled to speak on Friday at the Jackson Hole, Wyoming, central bankers' conference. Several market strategists said Powell's comments at the conclave would offer greater insight on the course of monetary policy than the minutes from the July Fed meeting given developments since then, including US President Donald Trump's announcement of tariffs on an additional $300 billion worth of Chinese goods.

The minutes “gave very little forward guidance,” said Robert Phipps, director at Per Stirling Capital Management in Austin, Texas. “Jackson Hole is going to be (Powell's) first chance to really talk since the latest tariff announcement.” On Wednesday, the nonpartisan Congressional Budget Office said changes in US and foreign trade policies since January 2018 would reduce inflation-adjusted US gross domestic product by 0.3 per cent from what it would be otherwise by 2020.

Among individual stocks, shares of Toll Brothers Inc slipped 4.5 per cent after the luxury homebuilder posted a decline in orders, hinting at weaker demand for new homes. Advancing issues outnumbered declining ones on the NYSE by a 2.51-to-1 ratio; on Nasdaq, a 2.14-to-1 ratio favored advancers.

The S&P 500 posted 31 new 52-week highs and five new lows; the Nasdaq Composite recorded 59 new highs and 67 new lows. Volume on US exchanges was 5.68 billion shares, compared with the 7.53 billion-share average for the full session over the last 20 trading days.

Published on August 22, 2019
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