Stocks are rising on Wall Street Thursday after a blizzard of reports suggested the U.S. economy is still humming, though inflation may be too.
The S&P 500 was 0.8% higher in afternoon trading. The Dow Jones Industrial Average was up 357 points, or 1%, at 34,932, as of 2:40 p.m. Eastern time, and the Nasdaq composite was 0.8% higher.
Some of the strongest action was in the bond market, where Treasury yields swung several times following the mixed economic data. While the reports added to evidence suggesting the U.S. economy may avoid a deep recession, the strength could also be adding upward pressure on inflation.
One report said U.S. shoppers spent more at retailers last month than economists expected. Such spending has been a linchpin for the economy, but it could also encourage retailers to keep trying to raise prices further.
The strong spending is a result of a remarkably resilient job market, which has withstood a steep jump in interest rates since early last year. A separate report Thursday morning said fewer workers applied for unemployment benefits last week than expected, which implies the number of layoffs remains low.
A third report said prices getting paid at the wholesale level rose more last month than economists expected. That could be a discouraging signal for households if the higher-than-expected inflation gets passed on to shoppers at the consumer level.
To try to get inflation back down to its 2% target, the Federal Reserve has been increasing interest rates sharply. The hope on Wall Street is that a slowdown in inflation since last summer means the Fed is done with its rate hikes, which slow the economy and hurt investment prices.
Treasury yields initially jumped following Thursday’s reports on fears they could push the Fed to raise rates again or at least to keep rates higher for longer. But economists pointed out much of last month’s acceleration in wholesale inflation was due to higher fuel prices, which can shift direction sharply and quickly.
Ignoring those and other particularly volatile prices, underlying inflation trends in Thursday’s report were closer to economists’ expectations. That echoed a report from a day earlier on inflation at the consumer level, which showed overall inflation accelerated to 3.7% in August largely because of a leap in fuel prices.
The yield on the 10-year Treasury initially jumped to nearly 4.30% immediately after the economic data’s release Thursday morning. But it later eased back, only to swing again. It was sitting at 4.28%, just above 4.25% from late Wednesday.
The two-year Treasury yield, which more closely tracks expectations for the Fed, also bounced up, down and back again following the reports. It rose to 4.99% from 4.98% late Wednesday. Earlier, it briefly leaped above 5.02%.
Traders pared back expectations for the Fed to raise rates again some time this year, though they’re still betting on a roughly 40% chance of that, according to data from CME Group.
Optimism that the Fed may be done hiking rates may be overdone, warned Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.
“The Fed is still likely to remain on hold next week, but if the economy continues to surprise to the upside, all bets are off as to what they’ll do after their final two policy meetings of the year,” he said.
In the stock market, shares of chip designer Arm Holdings rose 15.4% in their public debut. Arm’s stock priced at $51 per share in an initial offering, The offering valued Arm at $54.5 billion and could be an encouraging signal for the IPO market, which has slowed since the stock market began tumbling early last year on fears about higher interest rates.
Stocks of energy producers were also rising after oil prices rallied. Crude has been climbing for months as oil-producing countries try to support its price by curtailing their supplies. A barrel of U.S. crude rose back above $90, helping ExxonMobil to climb 1.8% and Marathon Oil to rise 2.2%.
Hewlett Packard slumped 2.1% after Warren Buffett’s Berkshire Hathaway revealed it trimmed its stake in the personal computer and printer company. Berkshire still owns 115.5 million shares in HP after selling 5.5 million earlier this week.
Delta Air Lines, meanwhile, became the latest airline to cut its profit forecast because of higher costs. It said higher-than-expected costs for fuel and maintenance are cutting into its earnings, and its stock slipped 0.3%.
In stock markets abroad, indexes rose in Europe after the European Central Bank raised interest rates again Thursday but made statements that some economists saw as a hint that it will now go on hold for a while.
The hike is supposed to help undercut inflation among the countries that use the euro currency, but it adds pressure to an economy already seen at risk for a recession.
France’s CAC 40 rose 1.2%, and Germany’s DAX returned 1%.
Indexes also climbed across much of Asia, with Japan’s Nikkei 225 up 1.4%.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.