U.S. stocks are flirting again with their records on Tuesday after several big companies delivered better profit reports for the spring than Wall Street expected.
The S&P 500 was 0.3% higher in early trading and on track to top its all-time high set in the middle of last week. The Dow Jones Industrial Average was up 209 points, or 0.5%, a day after setting its record. The Nasdaq composite was 0.4% higher, as of 9:35 a.m. Eastern time.
UnitedHealth Group helped push the market higher after reporting stronger results for the spring than analysts expected, despite losses it took due to a massive cyberattack. Its stock rose 2.8%, and the healthcare company reported growth in people served at both its Optum and UnitedHealth businesses.
Bank of America added 2.3% after it likewise reported stronger profit for the latest quarter than forecast. It benefited from growth in its investment banking business.
They helped offset a 1.4% drop for Morgan Stanley, which also reported stronger results for the latest quarter than expected. The financial company’s stock had already rallied more than 8% this month heading into its profit report, which may have raised the bar of expectations further. Analysts also pointed to some softer-than-expected results within its wealth-management business.
Several big winners from the day before, which benefited from heightened expectations for former President Donald Trump to retake the White House, also gave back some of their immediate jumps following Trump’s dodging of an assassination attempt over the weekend.
Trump Media & Technology Group fell 8.1%, a day after leaping 31.4%. Shares of the company behind Trump’s Truth Social platform regularly swing by big percentages each day, up or down.
In the bond market, some of the prior day’s moves also reversed themselves. Longer-term yields receded, while shorter-term yields rose after a report showed that sales at U.S. retailers held firm last month despite economists’ expectations for a decline.
The yield on the 10-year Treasury edged down to 4.20% from 4.23% late Monday. It’s fallen from 4.70% in April, which is a major move for the bond market, and that has given a solid boost to stock prices.
Yields have fallen on rising expectations that inflation is slowing enough to convince the Federal Reserve to begin cutting interest rates soon. The Fed has been keeping its main interest rate at the highest level in more than two decades in hopes of slowing the economy just enough to get inflation fully under control.
Tuesday’s stronger-than-expected data on retail sales may give Fed officials some pause because too-strong activity could keep upward pressure on inflation. But traders are still betting on a 100% probability that the Fed will cut its main interest rate in September, according to data from CME Group. A month ago, before some encouraging data on inflation, they saw a 70% chance.
Even though the economy’s growth is slowing, the hope on Wall Street is that the Federal Reserve can pull off an odds-defying tightrope walk. The goal is to grind down on the economy with high interest rates but then ease rates at the right time by the right amount so that it can avoid a recession. Tuesday’s resilient data on retail sales points to an economy that can continue to grow.
Risks lie on both sides of the Fed’s tightrope, though. While cutting rates too late could result in unnecessary economic pain that throws workers out of their jobs because of a recession, cutting too early could allow inflation to reaccelerate.
In stock markets abroad, indexes were lower across much of Europe. Asian indexes were mixed, with the 1.6% drop for Hong Kong’s Hang Seng a big mover.
