New York — U.S. stocks are hitting record highs on Tuesday after the latest sign that economic growth may be slowing without cratering as hoped.
S&The P500 rose 0.1% on the day after hitting its 30th all-time high this year. As of 12:43 p.m. Eastern time, the Dow Jones Industrial Average rose 8 points (0.1%), and the Nasdaq Composite Index fell 0.1%.
Stock markets rose somewhat due to softening yields in the bond market. Treasury yields fell after a report showed U.S. retail sales turned on the rise last month but missed economists’ expectations.
This could be an encouraging sign for the Federal Reserve as it tries to strike a difficult balancing act for the economy. The Fed wants to slow the economy through interest rates just high enough to keep inflation under control. The hope is that base interest rates, which are at their highest level in 20 years, can be cut in time to avoid an end to the painful recession.
After the retail sales data was released, bets were building among traders that the Federal Reserve would cut interest rates at least once, and possibly twice, this year, according to data from CME Group. Fed officials are planning one or two cuts in 2024.
The yield on the 10-year Treasury note fell to 4.22% from 4.29% on Monday afternoon. Two-year yields, which track Fed expectations more closely, fell further. It fell from 4.77% to 4.70%.
A survey of global fund managers by Bank of America found they were the most optimistic about stocks since the fall of 2021, with relatively little cash stash and heavy exposure to equities. Fewer managers also call for a “hard landing,” in which the economy falls into a deep recession.
Of course, the downside to Tuesday’s weaker-than-expected data could be that it’s a warning sign that household spending, a key engine of the U.S. economy, is fraying. In addition to May’s figures, the U.S. government also revised down retail sales figures for previous months.
Although inflation has slowed since its peak, it remains high, with low-income households in particular struggling to keep up with higher prices.
Homebuilder Lennar fell 4.4% after Co-CEO Stuart Miller said “consumer sentiment has been challenged” and interest rate changes were testing the company. The stock fell despite reporting better earnings in its most recent quarter than analysts expected.
Fisker’s stock fell 53% to 2 cents after the electric car maker filed for Chapter 11 bankruptcy protection. The company cited “various market and macroeconomic headwinds.”
On the winning side on Wall Street was La-Z-Boy, which rose 19.5% after reporting stronger-than-expected profits and revenue for its latest quarter. The furniture maker said the quarter is off to a good start ahead of Memorial Day, even though high interest rates are suppressing housing activity across the economy.
Silk Road Medical rose 23.9% after Boston Scientific agreed to acquire the medical device company in a deal valued at about $1.26 billion, including cash. Boston Scientific added 0.3%.
In overseas stock markets, European indices continued to recover after last week’s crushing defeat. The surprise victory of far-right parties in the election has raised concerns, particularly over the possibility of the French government increasing its debt burden.
France’s CAC 40 rose 0.8%, rising for the second straight week.
In Asia, Japan’s Nikkei 225 index rose 1%. Motor giant Toyota rose after shareholders rejected a bid to force Akio Toyoda, the founder’s grandson, to resign as board chairman.
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AP Business Writer Elaine Kurtenbach contributed.
