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U.S. stocks bounce after retail sales and investors await Fed’s Powell

U.S. stocks were off early highs but remained in bounce mode Tuesday as retail sales for April suggested the economy remained healthy and investors awaited remarks by Fed Chairman Jerome Powell.

How are stocks trading?
  • The Dow Jones Industrial Average
    DJIA
    remained up 185 points, or 0.6%, at 32,409 after rising 450 points at its session high.

  • The S&P 500
    SPX
    was up 44 points, or 1.1%, at 4,052.

  • The Nasdaq Composite
    COMP
    jumped 164 points, or 1.4%, to 11,827.

On Monday, the Dow industrials finished less than 0.1% higher, the S&P 500 closed 0.4% lower and the Nasdaq Composite fell 1.2% to 11,662.79. The declines followed another losing week for all three major indexes amid a selloff that’s seen the S&P 500 fall to the brink of a bear market and tech shares crater.

What’s driving the markets?

Investors looked determined to shake off a rough start to the week, with Nasdaq futures surging after a bullish session on Hong Kong’s Hang Seng Index
HK:HSI,
which closed up 3.2%.

U.S. retail sales painted a picture of a solid economic backdrop, rising 0.9% in April, slightly below the 1% advance forecast by economists surveyed by The Wall Street Journal. Auto dealers led the way but most major retail categories posted gains. The increase in sales in March, meanwhile, was raised to 1.4% from an original 0.7%.

“Retail sales in April show that the consumer is weathering the inflationary headwinds, rising for the fourth consecutive month,” said Jeffrey Roach, chief economist at LPL Financial, in emailed remarks.

“If pricing pressures can moderate enough to relieve some of the pressure on consumers, we expect a rebound in economic growth in Q2. The control group, the category that goes directly into GDP accounting, rose 1% in April,” Roach said.

However, shares of retailing giant Walmart Inc. WMT fell 9.5% after it reported fiscal first-quarter profit that missed expectations. Analysts were wary of a slowdown for Walmart amid rising inflation given the retailer’s exposure to lower-income customers. Shares of Home Depot, on the other hand, surged after upbeat results.

In other U.S. data published Tuesday, industrial production rose 1.1% in April, the Federal Reserve reported Tuesday, topping expectations for a 0.5% gain. Capacity utilization rose to 79% in April from 78.2% in the prior month. The capacity utilization rate reflects the limits to operating the nation’s factories, mines and utilities. Economists had forecast a 78.6% rate.

Market watchers have been trying to determine whether stocks have fallen enough to warrant a bounce for hard-hit equities, notably in the tech sector.

U.S.-listed shares of several China tech names rallied, with Pinduoduo Inc. PDD up more than 6%, though Tencent Music Entertainment Group TME gave up an early gain to fall 4%. Alibaba Group Holding BABA shares were up 6% and NetEase Inc. NTES remained up 0.8%.

China’s top economic official gave a public show of support for digital platform companies Tuesday, suggesting Beijing may be ready to let up on a year-long clampdown on technology giants as it battles a slowing economy.

JPMorgan raised the ratings for the stocks of seven Chinese tech firms on Monday, to overweight from underweight. “Only in March analysts at the bank had called the sector ‘uninvestable,’” said Neil Wilson, chief market analyst for Markets.com, in a note to clients.

However, Bank of America’s May global fund manager released Tuesday showed the highest cash levels since the Sept. 11, 2001 attacks in the U.S., the biggest short position on tech stocks since August 2006, and the biggest equity underweight since May 2020.

Federal Reserve Chairman Jerome Powell is due to speak at The Wall Street Journal’s Future of Everything event at 2 p.m., followed by appearances from Cleveland Fed President Loretta Mester, and after the market close, Chicago Fed President Charles Evans.

What companies are in focus?
  • Shares of Twitter Inc.
    TWTR
    fell 0.4% after Tesla Inc.
    TSLA
    CEO Elon Musk tweeted that his $44 billion deal for Twitter ‘cannot move forward’ without more data on spam bots. Twitter, meanwhile, said in a statement filed with the U.S. Securities and Exchange Commission that it was committed to its deal to be bought by Musk for $54.20 a share.

  • Home Depot Inc.
    HD
    shares climbed 3.3% after the home-improvement retailer’s first-quarter revenue and earnings beat Wall Street forecasts.

  • Citigroup
    C
    rose 5.4% after a regulatory filing showed that Warren Buffett’s Berkshire Hathaway
    BRK

    BRK
    took a nearly $3 billion stake in the bank during the first quarter.

  • Shares of United Airlines Holdings Inc.
    UAL
    rose 5.9%, after the air carrier raised its passenger revenue outlook, citing an improving demand environment. The popular U.S. Global Jets exchange-traded fund
    JETS,
    which tracks the airline sector, gained 3.2%.

  • The Food and Drug Administration said Tuesday that children between the ages of 5 and 11 years old can get a booster dose of the vaccine made by BioNTech SE
    BNTX
    and Pfizer Inc.
    PFE.
    BioNTech’s American depositary shares rose more than 5%, while Pfizer shares gained 1.2%.

How are other assets trading?
  • The yield on the 10-year Treasury note
    BX:TMUBMUSD10Y
    rose 8 basis points to 2.96%. Yields and debt prices move opposite each other.

  • The ICE U.S. Dollar Index
    DXY,
    a measure of the currency against a basket of six major rivals, fell 0.8%, pulling back after a recent surge that took it to a roughly 20-year high.

  • Oil futures traded near an eight-week high, with the U.S. benchmark
    CL
    up 0.5% to trade just below $115 a barrel.

  • Gold futures GC00 rose 0.3% to trade near $1,820 an ounce.

  • In European equities, the Stoxx Europe 600 
    XX:SXXP
    rose 1%, while London’s FTSE 100
    UK:UKX
    gained 0.6%.

  • In Asia, the Shanghai Composite CN:SHCOMP ended 0.6% higher. Meanwhile, the Hang Seng Index HK:HSI finished higher by 3.2% and Japan’s Nikkei 225 JP:NIK rose 0.4%.

See interviews with Fed Chairman Jerome Powell, the CEOs of companies including Wells Fargo, Moderna and FanDuel. Register for virtual access to The Wall Street Journal’s Future of Everything Festival, May 17-19. (Select virtual pass for complimentary access.)

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