Wall Street jumps on upbeat retailer forecasts, Fed relief

A trader works on the floor of the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., May 20, 2022. REUTERS/Andrew Kelly

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  • Macy’s and Dollar General climb after higher forecast
  • Weekly jobless claims fall; Confirmation of economic contraction in Q1
  • Indices up: Dow 1.49%, S&P 1.66%, Nasdaq 2.03%

May 26 (Reuters) – U.S. stock indices soared in a broad-based rally on Thursday following upbeat annual forecasts from several retailers, as data confirmed the U.S. economy contracted in the first quarter, allaying concerns over the aggressive interest rate hikes.

All of the 11 major S&P sectors rose, with consumer discretionary (.SPLRCD) up 4.1%, followed by a 1.9% rise in the financials sector (.SPSY).

The Russell 200 Small Cap Index (.RUT) gained 2.1%.

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Macy’s Inc (MN) jumped 16.2% after the department store raised its full-year profit forecast as demand for party wear rebounds. Read more

Dollar General Corp (DG.N) and Dollar Tree (DLTR.O) gained 11.7% and 18.4%, respectively, after raising their full-year sales forecasts as more Americans turn to discount stores with inflation at its highest level in four decades. Read more

Meanwhile, the Commerce Department report showed U.S. GDP fell at an annualized rate of 1.5% last quarter amid a record trade deficit and a sequential decline in the pace of inventory accumulation. The economy grew robustly by 6.9% in the fourth quarter. Read more

Separately, weekly jobless claims fell to 210,000 last week, reflecting a tight labor market despite rising interest rates and tighter financial conditions.

“For a forward-looking market, the idea is that we’re close to the bottom in terms of the type of news we’re getting and maybe prices have already priced in the slowdown we’re seeing,” he said. Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

“The data raises hopes for a potential accommodating pivot later this year.”

The reports came a day after minutes from the Federal Reserve’s May meeting showed most policymakers backed 50 basis point rate hikes in June and July to tame inflation, but seemed flexible to possibly change course in September.

Markets have sold off sharply this year on growing concerns about an economic slowdown due to aggressive Fed policy moves to rein in soaring prices. The war in Ukraine, pandemic-related lockdowns in China and recent dismal earnings forecasts also weighed on markets.

The Dow (.DJI) and the benchmark S&P 500 (.SPX) have lost 10.3% and 15.1% year-to-date, while the tech-heavy Nasdaq (.IXIC) fell 25.4% due to strong multiple growth. equities suffered from the rise in interest rates.

Still, the S&P 500 and Nasdaq look set to break their 7-week losing streak, the longest since the dotcom meltdown in 2001, with benchmarks up 3.7% so far this week. .

The CBOE Volatility Index (.VIX) hit its lowest level since May 18 at 27.61 points.

“The reality is much more complicated at this point and so we will have these countertrend rallies in any bear market environment,” said Hans Olsen, chief investment officer of Fiduciary Trust Company.

As of 11:37 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 479.02 points, or 1.49%, at 32,599.30, the S&P 500 (.SPX) was up 66.23 points , or 1.66%, to 4,044.96, and the Nasdaq Composite (.IXIC) rose 232.38 points, or 2.03%, to 11,667.12.

Advancing issues outnumbered declining issues with a ratio of 7.29 to 1 on the NYSE and 3.50 to 1 on the Nasdaq.

The S&P index recorded three new 52-week highs and 29 new lows, while the Nasdaq recorded 21 new highs and 79 new lows.

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Reporting by Devik Jain and Anisha Sircar in Bengaluru; Editing by Saumyadeb Chakrabarty and Vinay Dwivedi

Our standards: The Thomson Reuters Trust Principles.

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