Wall St ends sharply higher on optimism ahead of key inflation report

NEW YORK, Jan 11 (Reuters) – U.S. stocks ended sharply higher on Wednesday, with the S&P 500 and Nasdaq each rising more than 1% as investors were upbeat ahead of an inflation report that could give the Federal Reserve room to scale back its aggressive interest rate increases.

The much-anticipated report due on Thursday is expected by economists polled by Reuters to show that US consumer prices rose 6.5 percent from a year earlier in December, moderating from a 7.1 percent increase in November.

Among sectors, real estate ( .SPLRCR ) and consumer discretionary ( .SPLRCD ) were the day’s strongest performers, while Microsoft ( MSFT.O ), Amazon.com ( AMZN.O ) and other mega-cap growth names gave the S&P 500 its biggest boost.

The benchmark index is up so far for 2023 after falling sharply last year. Hopes that the Fed may soon ease its aggressive tightening after raising the federal funds rate seven times in 2022 have buoyed the market in recent sessions, although comments from some Fed officials have supported the view that the central bank needs to be wary of raising the interest rate to fight inflation.

“Investors expect us to be closer to a break than at any point last year,” said Jake Dollarhide, managing director of Longbow Asset Management in Tulsa, Oklahoma. He said this would be welcomed by the market.

Also, “anytime you have a down year, it’s not surprising many times to have a reversal at the beginning of the new year,” he said.

The Dow Jones Industrial Average (.DJI) rose 268.91 points, or 0.8%, to 33,973.01, the S&P 500 (.SPX) gained 50.36 points, or 1.28%, to 3,969.61 and The Nasdaq Composite added 4.89IC. 1.76% to 10,931.67.

Money market participants see a 75% chance that the Fed will raise the benchmark interest rate by 25 basis points in February.

This week also marks the start of fourth-quarter earnings season for S&P 500 companies, with overall S&P 500 earnings expected to have declined year over year, according to IBES data from Refinitiv.

The biggest US banks, which start their season later this week, are expected to report lower quarterly results as the risk of a recession increases due to monetary policy.

Goldman Sachs ( GS.N ) began laying off employees on Wednesday in a sweeping cost-cutting drive, a source familiar with the matter said. Shares of Goldman Sachs ended up 2%.

Retailer Bed Bath & Beyond Inc ( BBBY.O ) sharply extended recent gains to end up 68.6% despite dismal quarterly results, with some investors speculating it could be a potential takeover target.

Volume on US exchanges was 11.42 billion shares, compared to the 11 billion average for the entire session over the past 20 trading days.

Advances outnumbered decliners on the NYSE by a ratio of 3.78 to 1; on the Nasdaq a 2.25 to 1 ratio favored advancing.

S&P 500 posted 11 new 52-week highs and 1 new low; The Nasdaq Composite recorded 98 new highs and 20 new lows.

Reporting by Caroline Valetkevitch; Additional reporting by Shubham Batra and Amruta Khandekar in Bengaluru; Editing by Shounak Dasgupta and Grant McCool

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