NEW YORK (AP) — U.S. stocks hovered near all-time highs Monday.
The S&P 500 rose 0.1% in intraday trading, bringing it within 0.5% of its all-time high set in late March. As of 11 a.m. ET, the Dow Jones Industrial Average was up 41 points, or 0.1%, and the Nasdaq Composite was up 0.3%.
Stocks rose this month after a rough April, reigniting hopes that inflation will ease enough to convince the Federal Reserve to cut its key interest rates by the end of the year. A key test of those expectations will come Wednesday, when the U.S. government releases its latest monthly update on inflation felt by households across the country.
Other reports this week include updates on inflation seen by wholesalers and sales for U.S. retailers. These could show whether fears about the worst-case scenario for the country, in which persistently high inflation forms a devastating combination with economic stagnation, are justified.
There are growing hopes that the economy can avoid so-called “stagflation'' and remain strong enough to avoid a bad recession while cooling enough to keep inflation in check. Federal Reserve Chairman Jerome Powell recently said that the U.S. central bank is still closer to cutting rates than raising them, even though inflation has continued to be higher than expected so far this year. It reassured financial markets.
The Fed is keeping its key interest rate at the highest level in more than 20 years in hopes of slowing the overall economy and lowering inflation.
Some critics say continued inflationary pressures could force the Fed to hold off on cutting rates for longer than traders expected. “The Fed's inflation target is a pipe dream,” said Barry Bannister, a managing director at Stifel.
He said that any downward pressure on inflation that a recession typically puts on an economy has already been lifted as the U.S. economy slows in 2022-2023, and that the next big 500-point move in the S&P 500 is likely to be a decline. Expect.
Meanwhile, a series of better-than-expected reports on US corporate earnings supported the market. S&P 500 companies are on track to report a 5.4% increase in earnings per share for the first three months of this year compared to the same period last year, according to FactSet. This is the highest growth in about two years.
Much of the growth is again due to the “Magnificent Seven” giants such as Alphabet, Metaplatforms and Microsoft, which accounted for most of last year's stock market gains. However, there were more companies across the index than in previous years whose first-quarter profits exceeded analysts' expectations.
Earnings season is nearly over, with more than 90% of S&P 500 companies having reported their earnings. But next week will also include Walmart and several other big companies. They may provide more detailed information about how American households are faring.
There are growing concerns that cracks are appearing in U.S. consumer spending, one of the foundations protecting the economy from recession. Low-income households appear to be under particular strain as inflation remains high and credit card interest rates rise.
On Wall Street, shares rose 8.3% after Insight Inc. announced it would buy back up to $2 billion of its own stock. The biopharmaceutical company recently announced that it would return cash to shareholders through these acquisitions, which could result in significant remaining earnings per share.
GameStop soared 68.6% in a swing reminiscent of its crazy run a little more than three years ago. That's when a horde of novice investors with little money drove stock prices far above what many financial analysts and professional investors would call reasonable.
One believer in particular, nicknamed Roaring Kitty, was spearheading the attack, and posts on social media accounts linked to him added to the adrenaline rush. The price of GameStop stock was so volatile that trading was suspended nine times within the first 70 minutes of trading.
In the bond market, US Treasury yields fell. The yield on the 10-year U.S. Treasury note fell to 4.47% from 4.50% late Friday.
In overseas stock markets, Chinese indexes were mixed. The Biden administration is expected to announce this week that it will increase tariffs on electric vehicles, semiconductors, solar equipment and medical supplies imported from China, according to people familiar with the plans. In particular, tariffs on electric vehicles could increase by four times to 100%.
In Shanghai, the index fell 0.2%, while in Hong Kong it rose 0.8%. Most of the rest of Asia and Europe were slightly lower.
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Associated Press writer Zimo Zhong contributed.
