US Stocks Close Higher on Retailers 08/21 16:35
Strong earnings reports from several big retailers helped drive stocks
broadly higher on Wall Street Wednesday as the market bounced back from its
first loss in four days.
(AP) -- Strong earnings reports from several big retailers helped drive
stocks broadly higher on Wall Street Wednesday as the market bounced back from
its first loss in four days.
Target notched its biggest-ever gain, while 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 closed higher.
Technology 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 the rest of the 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 costly trade
war between the U.S. and China. But the strong quarterly results from the
retailers encouraged traders, who see the performance as a sign that U.S.
consumers, which account for 70% of U.S. economic growth, are healthy.
"We had a couple of great earnings reports this morning, especially Target,
which is a good barometer of the consumer," said Dan Heckman, national
investment consultant at U.S. Bank Wealth Management. "The consumer still
appears to be spending and doing well."
The S&P 500 rose 23.92 points, or 0.8%, to 2,924.43. The Dow Jones
Industrial Average gained 240.29 points, or 0.9%, to 26,202.73. The Nasdaq
added 71.65 points, or 0.9%, to 8,020.21. The Russell 2000 index of smaller
company stocks picked up 11.84 points, or 0.8%, to 1,509.85.
Major indexes in Europe also finished broadly higher.
The stock 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 key concern is that the U.S.-Chinese tariff war will weigh on global
The Trump administration has imposed a 25% tariff on $250 billion in Chinese
imports. A pending 10% tariff on another $300 billion in goods would hit
everything from toys to clothing and shoes that China ships to the United
States, however some 60% of the new tariffs wouldn't go into effect until
mid-December, and others were taken off the table altogether.
The potential impact those tariffs could have on U.S. consumers could hurt
sales for Target and other big retailers. Home Depot on Tuesday cut its sales
expectations for the year in part because of the potential tariff impact.
A look at Target and Lowe's earnings Wednesday appeared to dim investors'
concerns about the impact tariffs 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.
Traders also bid up shares in Lowe's sharply higher 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. The stock jumped 10.4%.
Lowe's solid earnings came a day after rival Home Depot reported strong
results of its own. Home Depot added 1.6%.
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 the fallout from the U.S.-China trade war.
Encouraging housing market data sent homebuilders higher. The National
Association 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, which have been sluggish amid rising housing prices and a
stubborn shortage of homes on the market. Hovnanian Enterprises vaulted 18.5%
and LGI Homes rose 2.8%.
Traders had a muted reaction to the afternoon release of notes from the
Federal Reserve's policymaking meeting last month. The minutes showed officials
were divided in their decision to cut interest rates for the first time in a
Investors have been seeking insight into the Fed's willingness to make
further interest rate cuts to help shore up the economy. Traders are now
looking ahead to Friday, when Fed Chairman Jerome Powell is scheduled to speak
at the central bank's annual conference in Jackson Hole, Wyoming.
Traders will be listening for clues as to what Fed officials will cut rates
again at its next meeting in September.
"Powell is in a difficult spot in that you have a meeting coming up in
September and everybody is looking to him," said Tom Martin, senior portfolio
manager with Globalt Investments. "Even though we want some more information
and a nod, one way or the other, toward September, I don't think we're going to
The Fed cut its key policy rate on July 31 for the first time in more than a
decade. It cited a number of "uncertainties" that were threatening the
country's decade-long expansion, from Trump's trade battles to slowing global
While the encouraging earnings 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, so investors should expect more market
volatility, particularly if the U.S. and China don't strike a trade deal.
Bond prices fell. The yield on the 10-year Treasury rose to 1.59% from 1.56%
late Tuesday. It briefly dropped below the two-year Treasury's yield for the
first time in a week. This so-called inversion of the U.S. yield curve has
accurately predicted the past five recessions.
Crude oil fell 45 cents to settle at $55.68 a barrel. Brent crude, the
international standard, rose 27 cents to close at $60.30 a barrel. Wholesale
gasoline rose 1 cent to $1.69 per gallon. Heating oil climbed 1 cent to $1.86
per gallon. Natural gas fell 5 cents to $2.17 per 1,000 cubic feet.
Gold was unchanged at $1,504.60 per ounce, silver rose 1 cent to $17.13 per
ounce and copper rose 1 cent to $2.58 per pound.
The dollar rose to 106.61 Japanese yen from 106.32 yen on Tuesday. The euro
weakened to $1.1085 from $1.1097.