Wall Street closes higher after shaky start on GDP report

Jul 27, 2022, 11:47 AM | Updated: Jul 29, 2022, 5:41 pm
As traders work and watch, a news conference held by Federal Reserve Chair Jerome Powell is display...

As traders work and watch, a news conference held by Federal Reserve Chair Jerome Powell is displayed at the New York Stock Exchange in New York, Wednesday, July 27, 2022. Stocks on Wall Street are solidly higher in afternoon trading Wednesday after the Federal Reserve raised its key interest rate by a widely expected three-quarters of a point as the central bank ratchets up its campaign to quell surging inflation. (AP Photo/Seth Wenig)

(AP Photo/Seth Wenig)

Stocks closed broadly higher again Thursday as investors grew more optimistic that a slowing U.S. economy means the Federal Reserve can temper its aggressive interest rate hikes aimed at taming inflation.

The S&P 500 rose 1.2% as more than 80% of the stocks in the benchmark index closed higher. The Dow Jones Industrial Average gained 1% and the Nasdaq rose 1.1%. Smaller company stocks edged out the broader market, lifting the Russell 2000 by 1.3%.

The Commerce Department reported that the economy contracted at a 0.9% annual pace last quarter. The decline in the gross domestic product — the broadest gauge of the economy — followed a 1.6% annual drop from January through March. Consecutive quarters of falling GDP are an informal, though not definitive, indicator of a recession.

The GDP report signaled weakness across the economy. Consumer spending slowed as Americans bought fewer goods. Business investment fell. Inventories tumbled as businesses slowed their restocking of shelves, shedding 2 percentage points from GDP.

The Federal Reserve has made slowing the U.S. economy to tame the highest inflation in 40 years its goal by raising interest rates, most recently on Wednesday. The latest GDP report, along with other recent weak economic data, could be giving some investors confidence that the central bank will be able to ease up on the size of any further rate hikes in the months to come, analysts said.

“Sometimes bad news is good news,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “The Fed may not have to be as aggressive as once thought. That’s what investors are looking at.”

In a research note Thursday, Jonathan Golub, chief U.S. equity strategist at Credit Suisse Securities, said “Whether or not we are in a recession will be debated by academics in the months ahead. However, today’s report unequivocally reflects a substantial weakening in economic activity, and raises the likelihood of a dovish pivot by the Fed.”

Traders now see a 74% chance that the Fed will raise its key rate by a half-point at its next policy meeting in September, and only a 26% chance of another 0.75-point increase, according to CME Group.

The central bank raised its key short-term interest rate by 0.75 percentage points on Wednesday, lifting it to the highest level since 2018. The move sparked a broad market rally led by technology stocks that helped give the Nasdaq its biggest gain in over two years. The major indexes are now all on pace for a weekly gain, extending Wall Street’s strong July rally.

On Thursday, the S&P 500 rose 48.82 points to 4,072.43, while the Dow added 332.04 points to close at 32,529.63. The Nasdaq gained 130.17 points to 12,162.59. The Russell 2000 rose 24.69 points to 1,873.03.

Technology stocks and retailers, restaurant chains and other companies that rely on direct consumer spending helped lift the S&P 500 Thursday. Microsoft rose 2.9%, Target gained 3.1% and McDonald’s added 1.8% higher.

Communication services stocks were the only laggards. Meta Platforms fell 5.2% after the social media giant said its revenue fell last quarter for the first time ever, dragged down by a drop in ad spending.

In a busy week of corporate earnings reports investors have focused on what companies are saying about inflation and the impact rising interest rates are having on their business and customers.

Markets were spooked Monday after retail giant Walmart warned that its profits are being hurt by rising prices for food and gas, which are forcing shoppers to cut back on more profitable discretionary items such as clothing.

Stanley Black & Decker slumped 16.1% Thursday after the tool maker’s second-quarter results fell short of Wall Street’s estimates. The company noted that demand significantly slowed in May and June.

Oshkosh fell 6.2% after the Wisconsin-based maker of postal trucks and military vehicles reported weaker-than-expected quarterly results and lowered its 2022 profit guidance, citing lingering supply chain disruptions and inflation.

Apple’s profit and revenue fell in its April-June quarter, but the results still beat analysts’ forecasts. The iPhone maker’s shares rose 0.4%, but added 3.9% in after-hours trading following the release of its earnings report.

Amazon jumped more than 12% in after-hours trading. It reported its second-consecutive quarterly loss but its revenue topped Wall Street’s expectations. The stock closed 1.1% higher during regular trading.

Meanwhile, Spirit Airlines shares rose 5.6% after JetBlue said it agreed to buy the budget airline for $3.8 billion to create the nation’s fifth largest airline. The agreement, which still requires regulator and shareholder approval, comes a day after Spirit’s attempt to merge with Frontier Airlines fell apart. Frontier Airlines vaulted 20.5%.

Bond yields were broadly lower. The two-year Treasury yield, which tends to move with expectations for the Fed, fell to 2.87% from 2.98% late Wednesday. The 10-year yield, which influences mortgage rates, fell to 2.68% from 2.74%.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Associated Press

Lawyer: UAE overturns sentence for former Khashoggi attorney

DUBAI, United Arab Emirates (AP) — The United Arab Emirates on Wednesday overturned a three-year prison sentence for an American citizen who had represented slain Saudi journalist Jamal Khashoggi, one of his lawyers said, instead punishing him with a fine of $1.36 million and deportation. The U.S. citizen, Virginia-based lawyer Asim Ghafoor, had been convicted […]
1 day ago
Associated Press

15 soldiers killed by roadside bombs in north Burkina Faso

OUAGADOUGOU, Burkina Faso (AP) — At least 15 soldiers were killed in northern Burkina Faso when their vehicles hit land mines, including a rescue team that hit a second explosive device when they were rushing to help, the army said. The explosions took place in the Bam area of the Center-North region, the army said […]
1 day ago
FILE -- Brothers of Italy's far-right party Giorgia Meloni attends a media event for center-right l...
Associated Press

Italy’s far-right Meloni on vote: I’m no danger to democracy

ROME (AP) — Italy’s far-right leader Giorgia Meloni, who is leading in opinion polls ahead of Sept. 25 parliamentary elections, insists she won’t be a danger to democracy if she becomes premier, contending that the Italian political right has “unambiguously” condemned the legacy of fascism. She also dismissed as “nonsense” concerns that if her Brothers […]
1 day ago
Associated Press

London kids to be offered polio shot after more virus found

LONDON (AP) — British health authorities say they will offer a polio booster dose to children aged 1 to 9 in London, after finding evidence the virus has been spreading in multiple regions of the capital, despite not confirming any cases of the paralytic disease in people. In a statement on Wednesday, Britain’s Health Security […]
1 day ago
Associated Press

China criticizes US chip law as threat to trade

BEIJING (AP) — China on Wednesday criticized a U.S. law to encourage processor chip production in the United States and reduce reliance on Asian suppliers as a threat to trade and an attack on Chinese business. The law signed this week by President Joe Biden promises $52 billion in grants and other aid to investors […]
1 day ago
FILE - Former President Donald Trump prepares to provide commentary for a boxing event on Sept. 11,...
Associated Press

What does ‘plead the Fifth’ mean? Will the Trumps do it?

NEW YORK (AP) — Former President Donald Trump is due Wednesday to face questioning under oath in New York’s civil investigation into his business practices. But will he answer? The ex-president’s lawyer has indicated that he will advise Trump to stay mum and invoke the Fifth Amendment’s protection against self-incrimination. It’s a constitutional right that […]
1 day ago

Sponsored Articles

Work at Zum Services...

Seattle Public Schools announces three-year contract with Zum

Seattle Public Schools just announced a three-year contract with a brand-new company to the Pacific Northwest to assist with their student transportation: Zum.
Swedish Cyberknife 900x506...

June is Men’s Health Month: Here’s Why It’s Important To Speak About Your Health

According to the Centers for Disease Control and Prevention, men in the United States, on average, die five years earlier than women.
...

Anacortes – A Must Visit Summertime Destination

While Anacortes is certainly on the way to the San Juan Islands (SJI), it is not just a destination to get to the ferry… Anacortes is a destination in and of itself!
...

Ready for your 2022 Alaskan Adventure with Celebrity Cruises?

Celebrity Cruises SPONSORED — A round-trip Alaska cruise from Seattle is an amazing treat for you and a loved one. Not only are you able to see and explore some of the most incredible and visually appealing natural sights on the planet, but you’re also able to relax and re-energize while aboard a luxury cruise […]
...

Compassion International Is Determined to ‘Fill’ a Unique Type of Football ‘Stadium’

Compassion International SPONSORED — During this fall’s football season—and as the pandemic continues to impact the entire globe—one organization has been urging caring individuals to help it “fill” a unique type of “stadium” in order to make a lasting difference in the lives of many. Compassion International’s distinctive Fill the Stadium (FtS, fillthestadium.com) initiative provides […]
...

What are the Strongest, Greenest, Best Windows?

Lake Washington Windows & Doors SPONSORED — Fiberglass windows are an excellent choice for window replacement due to their fundamental strength and durability. There is no other type of window that lasts as long as fiberglass; so why go with anything else? Fiberglass windows are 8x stronger than vinyl, lower maintenance than wood, more thermally […]
Wall Street closes higher after shaky start on GDP report