By Ambar Warrick and Devik Jain
(Reuters) – The S&P 500 and Nasdaq reversed course to edge higher in volatile trading on Thursday after a clutch of upbeat retail and technology earnings encouraged investors to shrug off hawkish comments on inflation from a Federal Reserve policymaker.
Inflation remains front and center for investors, and stock markets slipped after New York Federal Reserve Bank President John Williams said inflation is becoming more broad based and that expectations for future price increases are rising.
The indexes recovered as retail earnings from Macy’s and Kohl’s on the back of upbeat reports from Walmart Inc and Target Corp earlier this week signaled robust consumer demand.
“Investors are worried that the Fed is behind the curve, that they’ll have to say that (inflation) is no longer transitory… that could be the reason for why the market is digesting some of these earlier gains,” said Sam Stovall, chief investment strategist of CFRA Research in New York.
The Dow Jones lagged its peers on steep losses in network gear maker Cisco Systems Inc, which tumbled 8.3% after it forecast current-quarter revenue below expectations due to supply chain shortages and delays.
The Nasdaq was supported by Nvidia, which jumped 10% to a record high after the chipmaker beat quarterly estimates and forecast strong fourth-quarter revenue.
The Philadelphia semiconductor index rose 1.7% to a record high.
The S&P consumer discretionary sector led gains among its peers, rising more than 1% as positive retail earnings poured in. The S&P 500 retailing index hit a record high.
Macy’s Inc surged 20.9% after it raised its annual earnings guidance and flagged plans for a potential spinoff of its ecommerce division.
Peer Kohl’s Corp rose 7.5% after raising its forecast.
The readings showed consumer sentiment had persevered through rising inflation, and that retailers were set for a strong holiday season.
“The consumer is stronger than expected, it’s good news for the country as a whole. A stronger consumer is a reflection of a strong economic bounce,” said Mike Zigmont, head of research and trading at Harvest Volatility Management in New York.
Still, concerns over further increases in price pressure, along with uncertainty over the Fed’s plans for tightening have kept Wall Street muted this week.
Investors also hoped for more fiscal spending, after Speaker Nancy Pelosi said the House of Representatives could vote on President Joe Biden’s $1.75 trillion “Build Back Better” legislation by as soon as Thursday.
At 12:00 p.m. ET, the Dow Jones Industrial Average was down 86.40 points, or 0.24%, at 35,844.65, the S&P 500 was up 10.69 points, or 0.23%, at 4,699.36. The Nasdaq Composite was up 62.94 points, or 0.40%, at 15,984.51.
Among other stocks, Boeing Co rose 0.7% after Virgin Australia said it would add seven more 737 NG planes to its fleet, and as J.P. Morgan upgraded the planemaker’s stock to “overweight” from “neutral”.
Ecommerce major Alibaba Group slumped 9.3% after it forecast annual revenue to grow at its slowest pace since its 2014 stock market debut.
Declining issues outnumbered advancers for a 1.97-to-1 ratio on the NYSE and for a 2.27-to-1 ratio on the Nasdaq. The S&P index recorded 31 new 52-week highs and 9 new lows, while the Nasdaq recorded 77 new highs and 329 new lows.
(Reporting by Ambar Warrick and Devik Jain in Bengaluru; Editing by Maju Samuel and Sriraj Kalluvila)
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