Wall Street shares rose after previous changes after U.S. retailer Target lowered its earnings outlook for the second time in weeks, raising questions about the health of the world’s largest economy.
The S&P 500 stock index, which has seen weekly losses for eight of the past nine weeks, was 0.6% higher in the mid-afternoon in New York. The technology-focused Nasdaq Composite Index had also risen 0.6 percent.
The yield on the 10-year Treasury note fell 0.08 percentage points to 2.96% as the price of low-risk government debt rose. UK and German government bond prices also rose.
Shares of Target fell 3.9% after the group warned that it should change its excess stocks with deeper discounts, in a move that was expected to reduce its second-quarter operating margin around of 2%. The group estimated last month that margins would be “in a wide range” of about 5.3 percent.
After a season of mixed quarterly earnings, equity investors are debating whether the excess savings that U.S. consumers accumulated during coronavirus restrictions will be enough to keep spending rates down and prevent a recession. While Walmart lowered its earnings target last month, along with Target, Macy’s department store group and home improvement chain Home Depot increased theirs.
“Consumer spending is likely to continue and inflation is falling fast enough to keep the US economy afloat,” said Joost van Leenders, a equity strategist at Kempen Capital Management.
“There is also a possible story that inflation is still high, the [Federal Reserve] it has to do more and there is a recession. ”
The FTSE All-World Global Equity Index has fallen more than 14 percent this year as central banks around the world have raised borrowing costs to fight inflationary trends that began with the coronavirus-related supply chain and which were exacerbated by rising commodity prices caused by the invasion of Russia. of Ukraine.
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U.S. inflation data on Friday is expected to show consumer prices in the world’s largest economy rose at an annual rate of 8.3% in May, the same as the previous month. Money markets expect the Fed to raise its key fund rate by half a percentage point at its June and July meetings, and some policymakers point out that the series of increases will be extended until September.
“We have set the price we know so far and we must be prepared for an improvement, or the lack of one,” said Marco Pirondini, Amundi’s head of US stocks. “At the end of the summer, if we are still in a high inflation regime and [oil] sanctions against Russia, then the market needs to correct more. ”
After a short rally driven by China on Monday that eased some Covid-19 restrictions, Europe’s Stoxx 600 regional stock index lost 0.3 percent.
The 10-year yield on the German Bund, a benchmark for eurozone lending costs, fell 0.03 percentage points to 1.29 percent, despite widespread expectations that the European Central Bank will begin to rise interest rates from July.
“We anticipate significant volatility in bond markets around the ECB meeting this week, as the communication challenge of the policy strategy is formidable,” said Andreas Billmeier, European economist at Western Asset.
The dollar index, which measures the U.S. currency against six others, was flat. Brent crude, the benchmark for oil, rose 0.1% to $ 119.64 a barrel.