NEW YORK (AP) — Wall Street showed signs of stabilization on Wednesday, with U.S. stocks oscillating between slight gains and losses following a significant drop on Tuesday. Strong economic reports earlier in the week had sparked concerns about persistent inflation and the potential for prolonged higher interest rates.
Market Performance
As of midday trading, the S&P 500 rose by 0.2% after a 1.1% decline on Tuesday. The Dow Jones Industrial Average edged up by 36 points (0.1%), while the Nasdaq composite also gained 0.1%. This tempered performance reflects a more measured investor sentiment following the previous day's turbulence.
Bond Market Movements
In the bond market, recent volatility continued, though movements were less pronounced. Yields, which had surged last month, saw modest adjustments. High yields tend to discourage stock investments as they increase borrowing costs and make bonds more attractive relative to equities.
The relative calm in the market came as Wednesday’s economic reports were less robust than those released on Tuesday. This softer data helped buoy investor hopes that the Federal Reserve might continue its trend of cutting short-term interest rates, which are generally favorable for economic growth and investment prices.
Federal Reserve Insights
Fed Governor Christopher Waller provided some reassurance in a speech, emphasizing that more rate cuts are anticipated in 2025. Waller dismissed concerns that incoming tariffs under President-elect Donald Trump would have a lasting impact on inflation, asserting that inflation should trend downward over time.
“If the outlook evolves as I have described here, I will support continuing to cut our policy rate in 2025,” Waller stated. He highlighted that the pace of rate cuts would depend on balancing inflation control with maintaining labor market stability.
Following Waller’s comments and the release of economic reports, the yield on the two-year Treasury dipped slightly to 4.28% from 4.29% on Tuesday. This yield is closely watched as an indicator of Fed policy expectations.
Economic Indicators
One key report indicated that hiring by private U.S. employers slowed more than expected in December. This data may provide clues for the more comprehensive jobs report due from the Labor Department on Friday. Wall Street is particularly focused on this report, as it could influence perceptions of economic resilience and the Fed’s future rate decisions.
Another report revealed that fewer Americans applied for unemployment benefits last week than economists anticipated, reinforcing the strength of the labor market.
The yield on the 10-year Treasury also eased slightly to 4.68% from 4.69%. However, it remains significantly higher than levels seen a month ago, indicating ongoing concerns about borrowing costs and economic growth.
Sector Highlights
Among individual stocks, eBay surged 10.8%, the largest gain in the S&P 500, following an announcement of a collaboration with Meta Platforms. The pilot program will feature select eBay listings on Facebook Marketplace in the U.S., Germany, and France.
Cal-Maine Foods rose 3.8% after reporting stronger-than-expected profits for the latest quarter. CEO Sherman Miller attributed the increased sales to strong seasonal demand for eggs leading up to Thanksgiving. Egg prices had previously spiked due to a bird flu outbreak coinciding with holiday baking season demand.
Upcoming Earnings Reports
Investors are also gearing up for upcoming earnings reports. Delta Air Lines is set to release its first-quarter results on Friday, followed by major banks kicking off the earnings season next week.
Global Markets
International markets presented a mixed picture. South Korea’s Kospi index gained 1.2%, while Hong Kong’s Hang Seng index dropped 0.9%. European indexes also displayed varied performance, reflecting ongoing global economic uncertainties.
Conclusion
Wall Street remains in a state of cautious optimism, balancing positive signals from potential Fed rate cuts with underlying concerns about inflation and economic stability. As the week progresses, the focus will shift to key economic reports and earnings releases, which could set the tone for market movements in the coming weeks.
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