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Tuesday 24 April 2018

Wall Street stocks climb again as investors ignore inflation worries

After a shaky start, stocks rose for the fourth day in a row.

A Nasdaq employee works at his computer at the Nasdaq MarketSite, in New York (AP Photo/Richard Drew)
A Nasdaq employee works at his computer at the Nasdaq MarketSite, in New York (AP Photo/Richard Drew)

By Marley Jay

Investors on Wall Street sent stocks rising despite signals that inflation in increasing.

The gains were led by banks, technology firms, and consumer-focused companies, in a big change after the market’s inflation-inspired plunge earlier this month.

After a shaky start, stocks rose for the fourth straight day, and banks made some of the largest gains as bond yields reached new four-year highs.

The move in yields came after the government said consumer prices climbed in January a slightly faster pace than economists had expected.

A different government report showed retail sales were unchanged in December and slipped last month.

“I think the fears of the economy overheating have been a little bit balanced out with the combination of these two numbers,” said Katie Nixon, chief investment officer for Northern Trust Wealth Management.

“The bond market is not suggesting that runaway inflation is a deep concern.”

Stocks began plunging on February 1 after the US labour department said wages grew at a rapid rate in January.

Investors worried it meant inflation was rising and would push the Federal Reserve to start raising interest rates more quickly, making it more expensive for people and businesses to borrow money.

That would slow down economic growth as well as growth in corporate profits.

Ms Nixon said that Wednesday’s reports show inflation probably is not rising that fast.

The Standard & Poor’s 500 index rose 35.69 points, or 1.3%, to 2,698.63. The Dow Jones industrial average added 253.04 points, or 1%, to 24,893.49.

The Nasdaq composite climbed 130.10 points, or 1.9%, to 7,143.62. The Russell 2000 index of smaller-company stocks rose 27.15 points, or 1.8%, to 1,522.10.

After a 10% plunge in just nine days, the S&P 500 has risen 4.5% in the last four days.

The labour department said prices paid by consumers rose 0.3% in January, excluding volatile items like food and energy.

That is the most in a year, and it sent bond yields and gold prices higher.

The yield on the 10-year Treasury note rose to 2.91%, its highest mark in four years, from 2.84% a day earlier.

That helped banks, as the higher interest rates make lending more profitable, but it hurt high-dividend companies like utility and phone companies.

Those stocks are often compared to bonds because of their big dividend payments and relatively steady prices, but investors find them less appealing when bond yields are rising.

Americans cut back on purchases of cars, furniture and a variety of other products in January.

The commerce department also lowered its estimate for spending in December. That came after a three-month stretch that included the strongest holiday sales in a decade.

Retailers traded higher despite the tepid numbers in the report.

Amazon rose 36.54 dollars, or 2.6%, to a record high of 1,451.05 dollars and Tiffany added 2.15 dollars, or 2.1%, to 103.11 dollars.

Netflix climbed after the streaming video company said it signed another big-name TV writer and producer to a production deal.

According to reports, Glee and American Horror Story producer Ryan Murphy received a 300 million dollar deal that will span five years.

In August Netflix announced a deal with Scandal and Gray’s Anatomy creator and producer Shonda Rhimes.

Netflix climbed 7.73 dollars, or 3%, to 266 dollars.

The DAX in Germany rose 1.2% and the French CAC 40 added 1.1%. The FTSE 100 in Britain picked up 0.6%.

Japan’s benchmark Nikkei 225 slipped 0.4% after its economy grew at a slower-than-expected pace in the fourth quarter.

South Korea’s Kospi gained 1.1% and Hong Kong’s Hang Seng rose 2.3%.

Press Association

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