NEW YORK >> Wall Street is hanging near its best level in 20 months today following the latest signals that pressure on inflation may be easing.
The S&P 500 was 0.1% higher in midday trading. The Dow Jones Industrial Average was up 40 points, or 0.1%, at 36,165, as of 12:10 p.m. Eastern time, and approaching its record just below 36,800. The Nasdaq composite was 0.1% higher.
Homebuilder Toll Brothers was helping to lead the market with a gain of 2.5% after it reported stronger profit for the latest quarter than analysts expected. It said demand from buyers has also remained solid so far in the current quarter, thanks in part to slightly easier rates available for mortgages.
Mortgage rates have regressed as Treasury yields have dropped on hopes that the Federal Reserve may finally be finished with its barrage of hikes to interest rates, meant to get high inflation under control. Wall Street is betting the Fed’s next move will be to cut rates, possibly as early as March, which would juice the economy and financial markets.
More reports came today to suggest the Federal Reserve could at least hold steady on rates for now. Its next meeting on interest rates is in a week, and the widespread expectation is for it to leave its main interest rate alone at its highest level in more than two decades.
One report said private employers added fewer jobs last month than economists expected. While no one on Wall Street wants to see massive layoffs, a cooldown in the job market could remove upward pressure on inflation.
A more comprehensive report on the jobs market from the U.S. government will arrive Friday, one that can cause big swings on Wall Street.
“What we don’t know is how much the markets have already priced in a slowing labor market, or how they will react if Friday’s data comes in stronger than anticipated,” said Chris Larkin, managing director, trading and investing at E-Trade from Morgan Stanley.
A separate report today said U.S. businesses were able to increase the amount of stuff they produced in the summer by more than the total number of hours their employees worked. That stronger-than-expected gain in productivity more than offset increases to workers’ wages, and it could also keep a lid on inflationary pressures.
Treasury yields in the bond market were generally lower following the economic reports, and the 10-year yield fell to 4.11% from 4.17% late Tuesday. It was above 5% and at its highest level since 2007 in October.
Within the S&P 500, Campbell Soup was one of the biggest winners and rose 7.4% after reporting stronger profit for the latest quarter than expected.
Travel-related companies were also strong as crude oil prices fell sharply again to relieve some pressure on them. Carnival rose 7.6%, and Norwegian Cruise Line gained 6.1%.
Airlines were also flying high. Delta Air Lines climbed 4.6% after it told investors it’s sticking its forecasts for revenue and profit for the end of 2023. United Airlines rose 4.8%, and Southwest Airlines gained 4.4%.
On the losing end of Wall Street was Brown-Forman, the company whose brands include Jack Daniel’s whiskey. It fell 9% after reporting weaker earnings than analysts had forecast. It also cut its forecast for a measure of sales growth for the full year.
The drop in crude prices also dragged down stocks of oil-and-gas companies. ConocoPhillips fell 2.6%, and Marathon Oil lost 2.6%.
Crude prices have been generally falling for the last two months on expectations that too much oil is available for the global economy’s demand. A barrel of benchmark U.S. crude tumbled another 4.1% to $69.36 and is close to its lowest point since June. Brent crude, the international standard, fell 3.6% to $74.41 per barrel.
Wall Street could be setting itself up for disappointment if cuts to rates do not come as quickly as hoped. While Federal Reserve officials have hinted that their main interest rate may indeed be at a peak, some have said it’s too early to begin considering when cuts could come.
Stock markets abroad were mostly higher. Japan’s Nikkei 225 jumped 2% after a top central bank official reiterated the Bank of Japan’s will keep its monetary policy easy until it achieves a stable level of inflation.
Gains were more modest across the rest of Asia and Europe.