Retailers drive broad rebound
Strong earnings reports from several big retailers helped drive stocks on Wall Street broadly higher Wednesday as the market bounced back from its first loss in four days.
Target shares notched their biggest-ever gain and Lowe’s had its best day in more than a year, leading a broad rally in companies that rely on consumer spending. Nordstrom, Kohl’s, Gap and other retailers gained ground.
Tech companies accounted for a big share of the gains. Financial stocks rose as bond prices fell, pushing yields higher. Real estate and materials stocks lagged behind the overall market.
Investors have been worried that U.S. economic and corporate earnings growth could stumble under the strain of a slowing global economy and the U.S.-China trade war. But the retailers’ strong quarterly results encouraged traders.
“We had a couple of great earnings reports this morning, especially Target, which is a good barometer of the consumer,” said Dan Heckman of U.S. Bank Wealth Management. “The consumer still appears to be spending and doing well.”
The Standard & Poor’s 500 index rose 23.92 points, or 0.8%, to 2,924.43. The Dow Jones industrial average rose 240.29 points, or 0.9%, to 26,202.73. The Nasdaq advanced 71.65 points, or 0.9%, to 8,020.21. The Russell 2000 index of smaller-company stocks rose 11.84 points, or 0.8%, to 1,509.85.
The market has been volatile this month as investors try to parse conflicting signals on the U.S. economy and determine whether a recession is on the way.
A look at Target and Lowe’s earnings Wednesday appeared to dim investors’ concerns about the effects tariffs on Chinese goods may have on U.S. consumers.
Target soared 20.4% after the company easily beat profit forecasts for its second quarter. Target has been pushing faster delivery and investing heavily in new private label brands.
Lowe’s jumped 10.4% after the home improvement retailer’s latest quarterly results blew past expectations, buoyed by strong demand for spring goods and sales to contractors. The company’s strong quarter came even as it wrestled with lower lumber prices and rough spring weather.
Investors took a dim view of Cree’s latest quarterly results. Shares in the maker of energy-efficient lighting tumbled 15.8% after it issued a weak forecast as it deals with trade war fallout.
Encouraging housing market data sent home builders higher. The National Assn. of Realtors said sales of previously occupied U.S. homes rose 2.5% last month. The increase is a sign that lower mortgage rates are helping to increase sales. Hovnanian Enterprises shares leaped 18.5%.
Traders had a muted reaction to the release of notes from the Federal Reserve’s July policymaking meeting. The minutes showed officials were divided in their decision to cut interest rates for the first time in a decade.
Although earnings news put investors in a buying mood Wednesday, Heckman noted that August and September are historically some of the weakest months of the year for stocks.
The yield on the 10-year Treasury note rose to 1.59% from 1.56%; it briefly dropped below the two-year Treasury’s yield for the first time in a week. This inversion has heralded the last five recessions.