HONG KONG – Wall Street’s third straight winning week came to a quiet close Friday, as stocks tacked a whisper more onto their sizzling gains for November so far.
The S&P 500 edged up by 5.78 points, or 0.1%, to 4,514.02 and is near its highest level in three months. The Dow Jones Industrial Average inched up by 1.81, or less than 0.1%, to 34,947.28, and the Nasdaq composite gained 11.81, or 0.1%, to 14,125.48.
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Several retailers made strong gains after reporting better results for the latest quarter than analysts expected. Gap surged 30.6% after reporting much higher profit than Wall Street had forecast, more than doubling its stock's gain for the year so far. Ross Stores climbed 7.2% after reporting stronger profit and revenue than expected.
On the losing end was BJ’s Wholesale Club, which fell 4.8% despite also reporting better results than expected. Analysts pointed to an underlying sales figure that strips out the boost from store openings, which fell short of expectations.
Retailers are closing out what’s been a better-than-hoped earnings reporting season for the summer. Companies in the S&P 500 are on track to report their first overall growth in a year, according to FactSet.
But the much more impactful factor driving stocks higher this week was hope that inflation has cooled enough for the Federal Reserve to finally be done with its market-crunching hikes to interest rates.
The Fed has already raised its main interest rate to the highest level since 2001, trying to slow the economy and dent financial markets just enough to get inflation under control without causing a painful recession.
A report on Tuesday showing inflation at the consumer level cooled more than expected last month ignited hopes that the Fed could pull off the delicate balancing act. Subsequent readings fanned the hopes higher after suggesting inflation and the overall economy may be slowing.
Now traders are trying to bet on when the Fed could actually begin cutting interest rates, something that can juice prices for investments and provide oxygen for the financial system. The Fed has said that it plans to keep rates high for a while to ensure that the battle against inflation is definitively won, but traders are thinking cuts could begin early in the summer of 2024.
One source of potential worry about inflation has been receding in recent weeks. Oil prices have plunged amid worries about a mismatch between too much crude supply and too little demand.
A barrel of U.S. crude for December delivery rose $2.99 to settle at $75.89 Friday to recover some of its sharp losses from earlier in the week. But it’s still well below its perch above $93 in late September.
Brent crude, the international standard, rose $3.19 to $80.61 per barrel Friday.
In the bond market, the yield on the 10-year Treasury dipped to 4.43% from 4.44% late Thursday. Just a few weeks ago, it was above 5%, at its highest level since 2007 and undercutting prices for stocks and other investments.
Of course, too steep a drop in Treasury yields and too big a rally in stock prices could end up conspiring to work against Wall Street. Chair Jerome Powell said after the Fed's last meeting on interest rates that it may not hike any more if the summer's jump in Treasury yields and fall in stock prices remained “persistent.” That's because such pressures could act like substitutes for more rate increases on their own.
Since then, yields have eased sharply, and November is on track to be the best month for the S&P 500 in a year. It all means financial conditions have unwound a bit over half of the tightening seen in October, according to economists at Deutsche Bank.
Still, recent reports on inflation and the economy have been so encouraging that “the Fed can afford to be less concerned with this easing,” according to Justin Weidner and the other economists.
In stock markets abroad, Hong Kong’s Hang Seng tumbled 2.1%. Shares of Chinese e-commerce giant Alibaba plunged following its cancellation of a plan to spin off its cloud computing unit. The company cited uncertainties due to U.S. chip restrictions.
Stock indexes were mixed elsewhere in Asia while rising more strongly in Europe.
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AP Writers Zimo Zhong and Matt Ott contributed.