Stocks end choppy session higher

US stock indexes rose in a volatile session on Tuesday as investors continued to assess expectations for inflation and economic growth.

The S&P 500 rose 0.9%, led by gains in 10 of the index’s 11 sectors. The Nasdaq Composite rose 0.9%, while the Dow Jones Industrial Average rose 0.8%. All three indices opened slightly lower after an earnings warning from Target cast a shadow over the retail sector.

Stocks have swung in recent days, weighed down by changes in opinions about the strength of the economy and the likely path of central banks and interest rates. The big concern is that central banks could act too aggressively while battling inflation and slowing economic growth, or even triggering a recession.

said Fahad Kamal, chief investment officer at Kleinwort Hambros.

Target stocks fell 2.3% after the retailer issued a warning that its earnings will fall as it needs to cancel orders or offer discounts to clear unwanted merchandise, a possible sign of lower consumer spending. Shares of other major retailers followed suit, with Walmart down more than 1%.

A significant increase in retail inventories and diminishing demand could moderate prices across most consumer goods in the second half of the year, according to Peter Essely, head of portfolio management at Commonwealth Financial Network.

“This would be a good thing for inflation in general and would help lift markets as inflation continues to fall,” Essele said.

The US trade deficit for April narrowed to $87.1 billion, narrower than economists had expected, after hitting a record deficit the previous month. The main release this week will be Friday’s CPI, which will be closely watched for signs of whether or not inflation is weakening.

Treasury Secretary Janet Yellen said in Senate testimony on Tuesday that she expects inflation to remain elevated. Some investors expect inflation to have already peaked but the pace at which high prices are going down remains uncertain.

“As long as inflation remains high and continues to fall very slowly, the Fed will raise interest rates in order to combat high inflation,” said Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group. “It’s very difficult for the Federal Reserve to stage a smooth landing.”

The yield on the benchmark 10-year Treasury fell to 2.969% from 3.037% on Monday. Yields decrease when prices rise.

“With returns at 3%, it shows that the market hasn’t decided whether we’re going to have a recession or if we have a recession, how severe it will be,” said Julian Lafarge, chief market strategist at Barclays Private. . “This is what you might want to have if you’re anticipating a recession.”

Traders worked on the floor of the New York Stock Exchange on Friday.


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In other corporate news, Kohl’s shares jumped more than 9% after the Wall Street Journal reported that the department store chain was in exclusive talks to sell it to retail holding company Franchise Group..

The deal could value the company at around $8 billion.

Arcade Dave & Buster’s Entertainment stock rose 4.9% after reporting a jump in sales growth.

BuzzFeed shares rose 2.7%, reversing some of their gains after falling 41% on Monday after the lifting of the ban that prevented CEOs and large investors from selling shares.

Twitter shares surged 1% after Elon Musk threatened on Monday to end his takeover of the social media platform, saying the company had not complied with requests for data on spam accounts.

Casey’s General Stores are scheduled to report after markets close.

Offshore, the Stoxx Europe 600 Index is down 0.3%. In Asia, the main criteria were mixed. The Shanghai Composite Index is up 0.2%, while the Hang Seng Index in Hong Kong is down 0.6%. Japan’s Nikkei 225 index rose 0.1 percent.

The Japanese yen weakened 0.7%, reaching its lowest level against the dollar since April 2002. The yen has been sold off this year as the Bank of Japan remained committed to ultra-easy monetary policy, while many other central banks started raising interest rates to combat rapid inflation.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Vicky Ge Huang at vicky.huang@wsj.com

As markets respond to rising interest rates and the threat of a recession, stocks are approaching bear market territory. Gunjan Banerji of the Wall Street Journal explains what it takes to get stocks back into a bull market and why it’s hard to predict when they will turn around. Illustration: Jacob Reynolds

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