NEW YORK — Wall Street experienced a more stable trading session on Wednesday, recovering slightly from the previous day’s declines that were triggered by concerning reports about the economy. These reports had heightened fears that inflation and interest rates in the U.S. might linger at elevated levels.
The S&P 500 index increased by 0.2%, partially making up for the 1.1% drop it suffered the day prior. The Dow Jones Industrial Average rose by 106 points, translating to an uptick of 0.3%, while the Nasdaq composite showed a minor decrease of 0.1%.
In the bond market — a focal point for investors recently — the activity was also relatively subdued following a significant increase in yields throughout the last month. Rising yields can negatively impact stocks by increasing borrowing costs for both companies and consumers, prompting some investors to shift their capital into bonds instead of stocks.
Investors welcomed a renewed sense of calm after the economic reports released on Wednesday did not reflect the same strength observed on Tuesday. This situation can, counterintuitively, benefit Wall Street, as it raises optimism that the Federal Reserve might opt to continue reducing short-term interest rates. Lower rates can stimulate the economy and enhance investment value.
In a speech delivered on Wednesday, Federal Reserve Governor Christopher Waller expressed confidence that the central bank would pursue further interest rate cuts in 2025. This is a response to emergent speculation suggesting the Fed may have concluded its rate-cutting cycle after implementing three reductions since September.
Waller also commented that potential tariffs anticipated under President-elect Donald Trump would likely not have a “significant or persistent effect” on inflation. He acknowledged that although inflation has proven to be stubborn recently, he forecasts a downward trend over the long term.
“If the situation evolves as described, I will support further cuts to our policy rate in 2025,” Waller stated, indicating that the pace of these reductions would depend significantly on inflation progress while preventing a weakening of the labor market.
Following Waller’s remarks and the latest economic data, the yield on the two-year Treasury note, which often mirrors Federal Reserve expectations, dropped from 4.29% to 4.27%.
One of the economic reports indicated that U.S. employers, excluding the government sector, slowed their hiring pace more than economists had predicted in December. This could offer insights into the comprehensive jobs report expected from the Labor Department on Friday. The forthcoming report is anticipated to be a significant factor for Wall Street, especially as trading will pause on Thursday to observe a National Day of Mourning for former President Jimmy Carter. Investors hope for a report that showcases sufficient job strength to alleviate recession concerns but not so robust that it hampers the Fed’s ability to cut rates.
In another report released on the same day, it was noted that fewer U.S. workers applied for unemployment benefits last week than anticipated, another indication of a resilient job market.
The yield on the 10-year Treasury note, a key figure in the bond market, slipped to 4.67%, down from 4.69% late Tuesday. This yield once surpassed 4.70% earlier on Wednesday and stands notably above the 4.15% mark from about a month ago, having been below 3.65% in September.
The increase in yields can render borrowing more expensive for companies, with smaller businesses particularly vulnerable due to their reliance on loans for growth. The Russell 2000 index, which tracks smaller stocks, decreased by 0.5%.
On a negative note, Edison International saw a significant drop of 10.2% as wildfires raged in the Los Angeles area, prompting the Southern California Edison utility to shut off power for nearly 120,000 customers across six counties to mitigate safety risks posed by high winds.
Conversely, eBay experienced a surge of 9.9%, marking the largest gain within the S&P 500 as the company partnered with Meta Platforms to pilot selected eBay listings on Facebook Marketplace in the United States, Germany, and France.
Cal-Maine Foods appreciated by 1% after reporting stronger-than-expected profits for the last quarter. CEO Sherman Miller attributed this increase in sales to heightened demand during the Thanksgiving season, following a rise in egg prices due to a persistent bird flu outbreak coinciding with high holiday baking demand.
Looking ahead, Delta Air Lines is set to release its first-quarter results on Friday, followed by major banks beginning the latest earnings season next week.
Overall, the S&P 500 rose by 9.22 points, settling at 5,918.25. The Dow Jones Industrial Average climbed 106.84 points to 42,635.20, whereas the Nasdaq composite slipped by 10.80 points, closing at 19,478.88.
Internationally, stock market performance was mixed, with European and Asian indexes showing varied results. South Korea’s Kospi increased by 1.2%, while Hong Kong’s Hang Seng index fell by 0.9%.