On Tuesday, Wall Street witnessed a positive surge as a series of reports indicated that the economy is in better condition than initially feared.
During afternoon trading, the S&P 500 index saw a 0.7% increase. Following a five-week rally that propelled it to its highest level in over a year in mid-June, the index had been experiencing a gradual decline.
As of 12:06 p.m. Eastern time, the Dow Jones Industrial Average rose by 147 points or 0.4%, reaching 33,864. Meanwhile, the Nasdaq composite exhibited a 1.1% gain.
Leading the charge were airline stocks, with Delta Air Lines asserting that pent-up demand remains strong, particularly among high-income customers. Delta’s positive outlook for earnings this year, along with American Airlines’ 5.7% increase and United Airlines’ 5.4% rise, contributed to the overall market gains.
However, other companies faced more direct challenges due to high inflation. Walgreens Boots Alliance experienced a 9.5% drop in stock value after reporting weaker-than-expected profits for the latest quarter. The retail pharmacy company also revised its earnings forecast for the fiscal year, citing customers’ increased caution in spending and their preference for value amid rising inflation.
Lordstown Motors suffered a significant blow, plummeting by 36.3%, following its filing for Chapter 11 bankruptcy protection. The electric pickup truck company had previously warned about potential failure due to a dispute with electronics company Foxconn, which had reconsidered its planned $170 million investment in the startup.
Despite the presence of higher interest rates aimed at controlling inflation, the U.S. stock market has demonstrated strong performance this year, largely due to the economy’s ability to avoid recession. However, some investors have merely delayed their predictions for an eventual recession rather than dismissing the possibility entirely.
Recent data has shown mixed results, with a resilient job market offsetting weakening manufacturing and other sectors of the economy.
Reports on Tuesday generally surpassed economists’ expectations. Consumer confidence, sales of new homes, and orders for durable goods all outperformed forecasts. Although manufacturing activity in the Richmond region contracted, it did not decline as significantly as economists had feared.
These economic indicators will factor into the decision-making of the Federal Reserve and other central banks regarding the continuation of interest rate hikes. Higher rates can mitigate inflation, but they also slow down the overall economy and increase the risk of a recession.
Christine Lagarde, head of the European Central Bank, warned on Tuesday that inflation is decreasing slowly and pledged to raise rates sufficiently to break this persistence. She strongly hinted that the central bank is likely to raise rates again in July.
Similar expectations are held for the Federal Reserve. However, there is hope on Wall Street that the hike anticipated next month could be the final one, even though the Fed has recently indicated the possibility of two more rate increases this year.
Traders have largely abandoned hopes for multiple interest rate cuts in 2023, a prediction that was prevalent earlier in the year.
In Asian markets, stocks in Shanghai rose by 1.2% after Premier Li Qiang, China’s No. 2 leader, stated that economic growth has accelerated and is on track to meet this year’s official target of 5%. Hong Kong stocks also saw a 1.9% jump, although market movements were more subdued in other parts of Asia and Europe.
In the bond market, the yield on the 10-year U.S. Treasury rose to 3.76% from 3.72%, which impacts rates for significant loans such as mortgages. Meanwhile, the two-year Treasury yield, which is influenced by expectations for the Fed, increased to 4.75% from Monday’s 4.74% level.
Featured Image: Freepik
Author Kristen Moran 
