NEW YORK (AP) — U.S. stocks are climbing Friday, but all of Wall Street’s focus is thousands of miles to the west, where the head of the Federal Reserve is about to give a highly anticipated speech.
The S&P 500 was 0.6% higher in early trading, with less than a half hour before Fed Chair Jerome Powell is due to give a speech in Wyoming about interest rates. The Dow Jones Industrial Average was up 221 points, or 0.5%, as of 9:38 a.m. Eastern time, and the Nasdaq composite was 0.8% higher.
Treasury yields were holding relatively steady in the bond market. They’ve already pulled back sharply since April on expectations the Federal Reserve is about to start cutting its main interest rate for the first time since 2020. Such a move would ease the brakes off the economy after the Fed earlier jacked its main rate to a two-decade high.
With inflation slowing since hitting a peak above 9% two summers ago, and with the U.S. economy showing strains from the weight of high interest rates, the question on Wall Street is no longer when the Fed will cut rates. Instead, it’s by how much and how quickly will it end up cutting rates?
A danger is that traders have built their expectations too high, something they’ve frequently done in the past. Traders see a high likelihood the Fed will cut its main interest rate by 1 percentage point by the end of the year, according to data from CME Group. That would require the Fed to go beyond the traditional move of a quarter of a percentage point at least once in its three meetings remaining for the year.
If their predictions are wrong, which has also been a frequent occurrence, that could mean Treasury yields have already pulled back too much since they began declining in the spring. That in turn could pressure all kinds of investments. On Thursday, for example, the S&P 500 fell to its worst loss in more than two weeks after Treasury yields climbed.
In the meantime, stronger-than-expected profit reports from a range of companies are helping to support the market.
Ross Stores climbed 4.7% after topping analysts’ estimates for profit and revenue during the latest quarter. But CEO Barbara Rentler also said the retailer’s low- and moderate-income customers continue to feel the pressure of high prices across the economy, even if inflation has slowed.
Workday jumped 12.6% after likewise delivering better profit and revenue than analysts had forecast. The company, which helps businesses manage their people and money, also raised its forecast for a measure of profitability this year.
They helped offset an 11.2% tumble for Red Robin Gourmet Burgers, which reported a worse loss for the latest quarter than expected. It also lowered the top end of its forecasted range for revenue this year amid what it called a slowdown across the restaurant industry.
In the bond market, the yield on the 10-year Treasury edged down to 3.84% from 3.86% late Thursday. The two-year yield, which moves more closely with expectations for action by the Fed, dipped to 4.00%, where it was late Thursday.
In stock markets abroad, indexes were modestly higher in Europe after closing mixed across Asia.
The Nikkei 225 rose 0.4% in Tokyo after Bank of Japan Gov. Kazuo Ueda appeared to indicate more increases to interest rates may be coming, but they would be gradual.
The Bank of Japan helped set off a scary summertime swoon in financial markets around the world after a rate hike forced many hedge funds and other investors to abandon a popular trade all at once, where they had borrowed Japanese yen at cheap costs to invest elsewhere. An ensuing assurance from a top bank official that it wouldn’t raise rates again as long as markets were shaky helped calm markets.
The S&P 500 is back within 1.1% of its all-time high set last month after briefly falling nearly 10% below the mark.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
