NEW YORK (AP) — Wall Street held firmer on Wednesday, a day after strong reports on the economy hurt U.S. stocks by stirring up worries that inflation and interest rates may remain higher than expected.
The S&P 500 rose 0.2% to recover a bit of its 1.1% slump from the day before. The Dow Jones Industrial Average added 106 points, or 0.3%, and the Nasdaq composite edged down by 0.1%.
In the bond market, which has been the bigger focus for Wall Street recently, the moves were also more modest following the last month’s charge higher for yields. Higher yields hurt stocks by making it more expensive for companies and households to borrow and by pulling some investors toward bonds and away from stocks.
The increased calm returned to the market after reports on the economy Wednesday weren’t as strong as Tuesday’s. That can counterintuitively help Wall Street because it raises hopes that the Federal Reserve may keep cutting short-term interest rates. Wall Street loves lower rates, which can goose the economy and boost prices for investments.
Fed Governor Christopher Waller said in a speech Wednesday he still expects the central bank to deliver more easing of rates in 2025, pushing back against nascent speculation it may already be done after cutting three times since September.
Waller said he doesn’t expect tariffs that are possibly coming under President-elect Donald Trump to have a “significant or persistent effect” on inflation. And even though inflation has shown stubbornness recently, he still sees it trending downward over the long term.
“If the outlook evolves as I have described here, I will support continuing to cut our policy rate in 2025,” he said. “The pace of those cuts will depend on how much progress we make on inflation, while keeping the labor market from weakening.”
The yield on the two-year Treasury, which tends to closely track expectations for Fed action, fell immediately after Waller’s speech and the release of a couple economic reports. It eased to 4.27% from 4.29% late Tuesday.
One of the reports suggested U.S. employers outside of the government slowed their hiring in December by more than economists expected. That could offer a hint of what Friday’s more comprehensive jobs report from the Labor Department will show.
That update will likely be the main event for Wall Street this week, particularly after the stock market’s closure on Thursday in observance of a National Day of Mourning for former President Jimmy Carter. The hope is that the jobs report will show enough strength to keep worries of a recession stifled but not so much that it keeps the Fed from cutting rates.