Stocks Close Higher After Fed Minutes Signal Commitment to Raising Rates

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Shares of some retailers jump as companies including Nordstrom and Express raise their 2022 forecasts

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The S&P 500 index rose 37.25 points, or 0.9%, to 3978.73. The Nasdaq Composite climbed 170.29 points, or 1.5%, to 11434.74, reversing a sharp sell-off in tech stocks the day before. The Dow Jones Industrial Average rose 191.66 points, or 0.6%, to 32120.28 for the fourth consecutive trading day.

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Consumer-discretionary stocks extended gains to the S&P 500 by 3.4%. Several retail companies, including Nordstrom and Express,

raised its 2022 forecasts, while others such as Dix Sporting Goods indicated that business was not getting worse. The bright outlook offered investors a welcome change from last week, when Target and Walmart reported disappointing results. Retailer Nordstrom climbed $2.90, or 14%, to $23.58; apparel company manifest Jumped 16 cents, or 6.7%, to $2.54 and Dick’s rose by $6.90, or 9.7%, to $78.14.

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“Some investors were expecting retail Armageddon,” said Matt Perrone, director of research at Janus Henderson Investors. “The narrative was that it could be another grueling week. Now the market is rallying of relief around the consumer sector.”

Stocks had a poor start to the week on concerns about the Fed’s tightening of monetary policy to tackle high inflation and how much recession it could cause. The S&P 500 is down 17% from its previous record high in January and fell into bear-market territory last Friday before paring losses late in the session.

“It has been really volatile, to say the least. It begs the question of whether a recession is coming or not. It should effectively push the market,” said Fahd Kamal, chief investment officer at Kleinwort Hambros. is dragging and pulling.”

Minutes of the Fed’s May 3-4 meetingreleased on Wednesday, showed officials discussing the possibility that they would deliberately raise interest rates to higher levels to slow economic growth as the central bank races to tackle high inflation. US durable-goods orders for April rose 0.4%, a slower pace than economists expected.

The Fed minutes offered few, if any, surprises at the thinking of officials, said Philip Toes, chief executive of Toes Asset Management. Wednesday’s rally, which gained strength throughout the afternoon, may reflect more than any sentiment that many stocks had already fallen enough—at least for now. “I think we may be in a slight bear market here,” he said.

Stocks enter a bear market when indices such as the S&P 500 fall at least 20% from recent highs.

The stock has plummeted in 2022 as investors adjust to rising consumer prices and the Fed’s response. Sean O’Hara, president of Pacer ETF Distributors, said that as interest rates climb and the outlook for the economy turns bleak, shares of many companies are looking increasingly expensive for their earnings.

“When one goes up,” said Mr. O’Hara, “the other has to go down.”

The yield on the benchmark 10-year Treasury note fell to 2.746% from 2.758% on Tuesday. It has declined in five of the last six trading sessions. Yields fall when prices rise.

“The market is pricing the recession that will eventually come with the Fed’s stricture. It also predicts that inflation will slow to a much more reasonable level in 2023,” said Antonio Cavaro, head of investment at Generali Insurance Asset Management.

Government debt performs well in times of slow economic growth, which has led to stability in the bond market in recent times.

Oil prices rose 47 cents, or 0.4%, to $114.03 a barrel with global benchmark Brent crude. The US Energy Secretary said the Biden administration did not rule out restrictions on oil exports to drive down domestic fuel prices, Reuters reported.

Among individual shares, Snap shares rose $1.37, or 11%, to $14.16. The stock of the Snapchat maker fell 43% on Tuesday after it issued a profit warning, citing macroeconomic conditions, which have turned faster and worse than expected.

“Clearly there has been a re-evaluation of the technical assessment. It’s impossible to know how far this goes, but some of these are quality businesses and are significantly cheaper than what they’ve been trading recently,” Mr. Kamal said. “If you’re a long-term investor, it’s worth it.” Something interesting is about to happen.”

Home builder Toll Brothers rose $3.55, or about 8%, to $48.09 after reporting revenue and profit that beat analysts’ expectations.

The overseas, pan-continental Stokes Europe 600 gained 0.6%.

In Asia, key benchmarks were mixed. The Shanghai Composite Index was up 1.2% and Hong Kong’s Hang Seng was up 0.3%. Japan’s Nikkei 225 fell 0.3%.

—Ryan Decumber contributed to this article.

Write to Anna Hirtenstein at [email protected] and Justin Baer at [email protected]

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