Stock rally this week on strong retail earnings, softer Fed messaging


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U.S. equities rebounded on the week, sparked by positive earnings reports from retailers ahead of the holiday season and suggestions from Federal Reserve officials that they were ready to slow interest rate hikes in their anti-inflation battle.

The S&P 500 index rose 2 percent in the holiday-shortened week and closed Friday at 4,026. The Nasdaq gained 0.7 percent on the week, and the Dow Jones industrial average jumped 2.4 percent.

Investors took a dovish cue from the Fed’s November meeting minutes. While “various” members saw interest rates peaking at a higher level, “most” backed a slower pace of hikes. Policymakers also noted that the United States has about a 50 percent chance of entering a recession in the next year.

Fed officials speaking throughout the week echoed the minutes’ messages. San Francisco Fed President Mary Daly and Cleveland’s Loretta Mester said during separate remarks that inflation remains too high, though both pointed to a need for officials to be judicious in calibrating policy.

Deutsche Bank Research strategists including Jim Reid wrote that there were fresh signs that risk appetite was continuing to grow among investors, “aided by some positive data releases and further signals that central banks might not end up hiking as aggressively as feared.”

Oil continued to fall, as demand was threatened by European discussions of a higher-than-expected price cap on Russian crude and concerns about a global economic slowdown. West Texas Intermediate crude futures dropped below $77 a barrel Friday.

Applications for unemployment benefits rose to 240,000 in the week ended Nov. 19, marking a three-month high. HP announced Tuesday that it plans to cut up to 6,000 jobs as demand for personal computers declines.

Yet consumer spending appeared resilient, as a slew of retailers blew past earnings expectations. Best Buy climbed the most since 2020 after improving its profit forecast. Abercrombie & Fitch and American Eagle Outfitters each climbed at least 18 percent Tuesday on better-than-expected quarterly reports.

On Wednesday, Fed Chair Jerome H. Powell will make an appearance at the Brookings Institution, where he will discuss the economic outlook and changing labor market.

Friday’s jobs report is expected to show a gain of 200,000 hires in November and the unemployment rate holding steady at 3.7 percent, according to a Bloomberg survey of economists.

The Treasury will sell 13- and 26-week bills Monday. They yielded 4.382 percent and 4.743 percent in when-issued trading, respectively. It also will auction $34 billion in 52-week bills Tuesday and four- and eight-week bills Thursday.



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