Wall Street closed out a strong January with more gains. The S&P 500 rose 58.83 points Tuesday, or 1.5%, to 4,076.60, marking its third winning month in the last four. The Dow Jones Industrial Average rose 368.95 points, or 1.1%, to 34,086.04. The Nasdaq composite rose 190.74 points, or 1.7%, to 11,584.55. The gains came ahead of what many investors hope will be one of the Federal Reserve’s last hikes to interest rates for a while, the AP reports. Markets got a boost after a report showed that growth for workers’ pay and benefits slowed during the end of 2022. While that’s frustrating for people trying to keep up with soaring prices, markets see it as an encouraging sign of easing pressure on inflation.
With the pace of inflation cooling since the summer, virtually all of Wall Street expects the Fed on Wednesday to announce its smallest increase to interest rates since March, at 0.25 percentage points. That would be the latest stepdown after it pushed through four straight increases of 0.75 points and then a hike of 0.50 points. Such moves try to stamp out inflation by intentionally slowing the economy and dragging down on prices for stocks and other investments. The worry is that too-high rates would cause a severe recession and drop-off in corporate profits. Other reports on the economy Tuesday came in lower than expected, which could give the Federal Reserve leeway to be less harsh on rates. A measure of confidence among consumers weakened in January, when economists were expecting it to stay flat.
Earnings reporting season is also in top gear, with McDonald’s and other big companies headlining the day. They offered a mixed picture, much as reports have so far this reporting season. McDonald’s fell 1.3% despite reporting stronger profit and revenue than analysts expected. What may have disappointed Wall Street was McDonald’s forecast for upcoming profit margins. They could imply inflation and cost pressures may be continuing to squeeze the company. Caterpillar dropped 3.5% after it reported weaker profit than expected but stronger revenue. On the winning side was General Motors, which revved up by 8.4% after reporting stronger profit and revenue than expected.
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