Stock market today: Wall Street gains ground to extend winning streak

By STAN CHOE and DAMIAN J. TROISE
AP Business Writers

NEW YORK (AP) — Wall Street turned solidly higher Thursday following a weak start as a messy mix of economic reports yielded no clear sign about where the economy and inflation are heading.

The S&P 500 was 0.9% higher in afternoon trading, coming off its highest level since April 2022. The Dow Jones Industrial Average was up 377 points, or 1.1%, at 34,357, as of 1:33 p.m. Eastern time, while the Nasdaq composite was 0.7% higher.

Homebuilder Lennar helped lead the S&P 500 with a gain of 3.6% after reporting stronger profit and revenue for the latest quarter than expected. It also gave a stronger-than-expected forecast for upcoming deliveries, saying customers are accepting the “new normal” of higher interest rates.

Kroger, meanwhile, sank to one of the market’s sharper losses after reporting slightly weaker revenue for the latest quarter than expected. It fell 2.9% despite also reporting stronger profit than expected and reaffirming many of its financial forecasts for the year.

The stock market is still absorbing the Federal Reserve’s warning from a day earlier that it could raise interest rates two more times this year in its battle against inflation. It’s already hiked its benchmark overnight rate to the highest level since 2007, which has helped slow inflation somewhat but has also caused sharp pain in several areas of the economy.

The Fed is trying to find the right level for rates where it can slow spending by Americans enough to get inflation under control but not so much that it causes a deep recession. Reports on Thursday offered a mixed picture of how it’s going.

Uncertainty is high after the Fed’s warning from Wednesday shook investors who had been expecting just one more increase to rates this year, if any. But on the upside for financial markets, the Fed also decided to hold rates steady Wednesday, the first time it hasn’t raised rates at a meeting in more than a year. It also said that it hasn’t made any final decision yet on whether to keep raising rates.

“The Fed remains data and event dependent, so investors globally will need to be so as well,” said John Vail, chief global strategist at Nikko Asset Management.

Meanwhile, the trend in markets has been solidly upward. The S&P 500 is on pace for a sixth straight gain, which would mark its longest winning streak since late 2021. It’s up nearly 23% since hitting a bottom last October, as the economy has so far avoided a recession and inflation has come down from its peak last summer.

Thursday’s headline economic report showed that sales at U.S. retailers unexpectedly strengthened last month, when economists were forecasting a drop. That could be a sign that spending by consumers overall is holding up despite more expensive rates on credit cards and other loans.

But underneath the surface, the numbers were a touch weaker than expected after ignoring sales of autos, fuel and some other areas. Those numbers feed into the U.S. government’s estimates for the overall economy’s growth.

A separate report said slightly more workers applied for unemployment benefits last week than expected. Though the number is still relatively low compared with history, a tick higher could be a sign that a remarkably resilient job market is finally starting to loosen following the Fed’s barrage of rate hikes since early last year.

In manufacturing, the impact of higher rates has been more clear. The industry has been contracting for months, though it accounts for only a relatively small part of the economy.

One report Thursday said manufacturing activity in the mid-Atlantic region suffered its 10th straight month of contraction. Another, though, said sentiment among manufacturers in New York state unexpectedly improved this month.

Treasury yields slumped after the reports. The yield on the 10-year Treasury fell to 3.73% from 3.79% late Wednesday. It helps set rates for mortgages and other important loans.

The two-year yield, which moves more on expectations for the Fed, fell to 4.64% from 4.69% late Wednesday.

Investors are facing a relatively quiet period of economic news ahead of the next Fed decision on interest rates in late July. That could make it tricky to gauge the impact of high interest rates and still-high inflation. The next update for the Fed’s preferred inflation measure, which tracks personal consumption and expenditures, will be released on June 30 by the Commerce Department.

Wall Street will get another inflation report focusing on consumer prices and a broad employment report in July. Investors will be closely monitoring the next round of corporate earnings that ramp up in late July for more insight into how companies are dealing with high inflation and a slowing economy.

The Fed isn’t alone in keeping the pressure up on interest rates in order to battle inflation. The European Central Bank raised rates on Thursday and pledged more may be on the way, including at its next meeting in July.

Stocks were down in Europe, with France’s index 0.5% lower and Germany’s 0.1%.

Asian stocks were mixed. Chinese indexes rose amid hopes for more stimulus from its central bank as the recovery from anti-COVID restrictions for the world’s second-largest economy stumbles.

Stock indexes roses 2.2% in Hong Kong and 0.7% in Shanghai.

In Japan, machinery orders for April showed the first growth in three months. Trade figures for May showed a deficit for 22 months in a row, as import costs rose with the rising energy and other prices.

Japan’s benchmark Nikkei 225 erased morning gains to finish down 0.1%.

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AP Business Writers Yuri Kageyama and Matt Ott contributed.