By Damian J. Troise and Alex Veiga
Stocks on Wall Street bounced back from an early slide and closed higher Monday, extending the market's recent winning ways as investors look ahead to several updates from retailers this week.
The S&P 500 rose 0.4% after having been down 0.5% in the early going. The benchmark index has risen for four straight weeks and is up 13.5% so far in the third quarter, although it's still lower for the year.
The Dow Jones Industrial Average rose 0.5% and the Nasdaq gained 0.6%. Smaller company stocks also rose, sending the Russell 2000 index 0.2% higher.
The market got off to a bumpy start as traders reacted to news overnight that China’s central bank cut a key interest rate, acknowledging more needed to be done to shore up its economy. The move is the latest warning for markets already on edge over record-high inflation and fears about recessions in the U.S. and elsewhere.
China is the world’s second-largest consumer of crude oil, so the news weighed on energy prices. U.S. crude oil prices slumped 2.9% on worries about the global economy and weighed heavily on energy stocks. Chevron fell 1.9%.
Treasury yields fell as a report showed manufacturing in New York state unexpectedly contracted. The yield on the 10-year Treasury, which banks use to set mortgage rates, fell to 2.79% from 2.83% late Friday.
Some big banks fell as bond yields declined. Capital One slid 1.8%.
Still, all but two of the 11 sectors in the S&P 500 closed higher. Technology stocks, retailers and other companies that rely on direct consumer spending accounted for a big share of the gains. Visa rose 2.4% and Costco added 1.6%.
Moderna rose 3.3% after British regulators authorized an updated version of its COVID-19 vaccine.
All told, the S&P 500 rose 16.99 points to 4,297.14. The Dow added 151.39 points to 33,912.44. The Nasdaq gained 80.87 points to 13,128.05. The Russell 2000 rose 4.73 points to 2,021.35.
The market’s choppy start to the week follows four straight weeks of gains for the benchmark S&P 500 on hopes that inflation is peaking and that the Federal Reserve could ease up on its aggressive interest rate hikes. The central bank has been raising short-term interest rates to help slow economic growth and cool the hottest inflation in 40 years.
Wall Street is worried that the Fed could hit the brakes too hard and send the economy into a recession, and any signal that inflation could be peaking or retreating has helped ease some of those worries.
Investors are also keeping a close watch on how inflation is affecting businesses and consumers. Spending has slowed and the broader economy has already contracted for two straight quarters. Several big retailers will give investors more detail on how their businesses are holding up when they report earnings this week.
Home Depot and Walmart report their results on Tuesday and Target's results are due on Wednesday. On July 26, the S&P 500 fell more than 1% after Walmart warned that inflation was hurting its customers' spending power and said its second-quarter profit would be lower than previously forecast.
Wall Street will get another look at the health of the retail sector and consumer spending when the Commerce Department releases its July retail sales report on Wednesday. Economists surveyed by FactSet expect modest 0.2% growth from June, when sales rose 1%. That increase largely reflected higher prices, particularly for gas. But it also showed that Americans continue to spend, providing crucial support for the economy, though some economists suggest it's mostly coming from higher-income households.
Updated on August 15, 2022, at 5:33 p.m. ET.