Wall Street’s main indexes opened higher on Tuesday, as solid retail sales data and a clutch of strong forecasts added to an upbeat global mood driven by hopes of easing crackdown on tech firms and COVID-19 in China.
The Dow Jones Industrial Average rose 203.58 points, or 0.63%, at the open to 32,427.00. The S&P 500 opened higher by 43.99 points, or 1.10%, at 4,052.00, while the Nasdaq Composite gained 242.78 points, or 2.08%, to 11,905.57 at the opening bell.
Canada’s main stock index opened higher as well, aided by gains in mining and technology stocks, although concerns around soaring inflation and a global slowdown capped their gains.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 255.05 points, or 1.26%, at 20,461.46.
Major European markets were also positive in morning trading.
“Stock markets are in positive territory once more on Tuesday as investors continue to see value after a substantial sell-off in recent weeks,” commented Craig Erlam, senior market analyst, UK & EMEA, for forex trading firm OANDA.
“I’m not particularly convinced about the sustainability of such a move against the backdrop of high inflation, much higher interest rates and probable recessions but there’s no doubting that the scale of the declines recently was bound to attract some back in,” he added.
Early Tuesday, investors got results from Home Depot and Walmart as U.S. earnings season continues to wind down.
Home Depot hiked its full-year sales forecast on demand for home improvement tools and building materials. The retailer now expects comparable sales to increase about 3 per cent in fiscal 2022, compared to its previous forecast of a slight positive growth. Analysts were expecting a 1.4-per-cent increase, according to IBES data from Refinitiv.
However, Walmart cut its full-year profit forecast. The company said it expects fiscal 2023 earnings per share to fall about 1 per cent, compared to its previous forecast of a mid-single digit increase.
The U.S. also released retail sales data for April this morning. They increased solidly during the month as consumers bought motor vehicles amid an improvement in supply and frequented restaurants, showing no signs of demand letting up despite high inflation. Retail sales rose 0.9% last month, and data for March was revised higher to show sales advancing 1.4% instead of 0.7% as previously reported. The data came in close to economists’ expectations.
“Never bet against the US consumer has always been a good adage to bear in mind throughout my 20-plus years in the markets. Despite the surge in prices weighing on their purchasing power, the US consumer now appears to be single-handedly keeping the global economy afloat,” said Paul Ashworth, chief U.S. economist with Capital Economics.
“Given this show of strength from consumers, speculation that the US economy is in danger of an imminent plunge into recession look badly misplaced. Together with the surprising strength of core CPI last month, this is another reason to expect the Fed to continue hiking rates by 50bp per meeting, despite the recent swoon in stock markets,” he said.
In other news this morning, Elon Musk’s US$44-billion bid to buy Twitter Inc. remains in the spotlight with Mr. Musk saying the deal can’t move forward until the social media company shows proof that spam bots account for less than 5 per cent of its total users.
“My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of <5% (spam accounts). This deal cannot move forward until he does,” Musk said in a tweet.
On Monday, Mr. Musk suggested he could seek a cheaper price for the deal, telling a conference in Miami: “You can’t pay the same price for something that is much worse than they claimed.” Last week, Mr. Musk said the Twitter deal was on hold pending further user data from Twitter.
In this country, The Globe’s Alexandra Posadzki reports that Quebecor Inc. chief executive officer Pierre Karl Péladeau is crediting recent regulatory decisions with encouraging competition in the wireless sector, as Quebecor’s Videotron Ltd. subsidiary prepares to expand its mobile services beyond its home province of Quebec.
Overseas, the pan-European STOXX 600 rose 1.6 per cent in morning trading. Britain’s FTSE 100 gained 0.76 per cent. Germany’s DAX and France’s CAC 40 advanced 1.46 per cent and 1.37 per cent, respectively.
In Asia, Japan’s Nikkei finished 0.42-per-cent higher. Hong Kong’s Hang Seng jumped 3.27 per cent as Chinese tech shares surged.
Crude prices were up in early going helped by optimism over the potential for further easing of COVID-19 restrictions in China and continued efforts in the EU to gradually phaseout Russian crude.
The day range on Brent is US$113.64 to US$115.14. The day range on West Texas Intermediate is US$113.49 to US$114.98.
“Oil prices have remained near multi-week highs this week, supported by surging gasoline and distillate prices in the U.S., and fears around an EU ban on Russian oil imports remaining in play,” OANDA senior analyst Jeffrey Halley said.
Sentiment was underpinned by reports that Shanghai marked a third consecutive day with no new COVID-19 cases outside quarantine zones. Shanghai plans to resume outdoor activities in stages, with most restrictions on movement remaining in place until May 21. The lockdown is likely to be lifted by June.
Markets have been nervously watching the situation in China, concerned that tough COVID-19 restrictions will hit demand and weigh on the broader economy.
Later in the session, traders will get weekly crude inventory numbers from the American Petroleum Institute. More official numbers follow on Wednesday morning from the U.S. Energy Information Administration.
Analysts are expecting to see a further decline in crude stocks.
In other commodities, gold prices steadied.
Spot gold was up 0.1 per cent at US$1,826.29 per ounce by early Tuesday morning. U.S. gold futures gained 0.6 per cent to US$1,825.00.
“The yellow metal has been very vulnerable to rising yields and a stronger [U.S.] dollar recently as central banks are forced into much more aggressive action,” OANDA senior analyst Craig Erlam said in a note.
“With the dollar remaining a hot favourite and pressure intensifying on central banks to tackle inflation, gold could remain out of favour for a while yet.”
The Canadian dollar was higher, trading around 78 US cents, as its U.S. counterpart eased for a third session against a group of world currencies.
The day range on the loonie is 77.79 US cents to 78.08 US cents.
There were no major Canadian economic releases on Tuesday’s calendar. In the U.S., Federal Reserve chair Jerome Powell will speak at a conference this afternoon on the central bank’s plan for taming inflation.
In world currencies, the U.S. dollar index was down 0.39 per cent to 103.76, more than 1-per-cent below last week’s two-decade high of 105.010, according to figures from Reuters.
The euro rose 0.4 per cent to US$1.0476.
The yen was 0.24-per-cent lower at 129.41 per U.S. dollar, holding above a two-decade low while Britain’s pound jumped 1.2 per cent to US$1.2469.
In bonds, the yield on the benchmark U.S. 10-year note was modestly higher at 2.913 per cent in the predawn period.
U.S. retail sales rose 0.9% last month, the Commerce Department said on Tuesday. Data for March was revised higher to show sales advancing 1.4% instead of 0.7% as previously reported. Economists polled by Reuters had forecast retail sales accelerating 0.9%, with estimates ranging from as low as 0.2% to as high as 2.0%. Last month’s increase reflects both strong demand and higher prices.
(9:15 a.m. ET) U.S. industrial production for April.
(10 a.m. ET) U.S. NAHB Housing Market Index for May.
(10 a.m. ET) U.S. business inventories for March.
With Reuters and The Canadian Press