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Wall St climbs on growth stocks boost ahead of inflation data

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Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly

Wall Street’s main indexes rose on Wednesday led by gains in rate-sensitive growth stocks as the focus shifts to a key inflation reading due later this week, which would provide more clues on the Federal Reserve’s rate hike trajectory.

Nearly all major S&P sectoral indexes were trading in the green, with Inc (AMZN.O) and Tesla Inc (TSLA.O) up 4.0% and 3.8% respectively, and among top boosts to the benchmark S&P 500 index (.SPX).

Gains in both the stocks pushed up the consumer discretionary sector (.SPLRCD) nearly 2%. Only healthcare stocks (.SPXHC) were an outlier, down marginally.

Markets are facing renewed optimism in 2023 on hopes that a slowdown in the U.S. economy could pave the way for a less hawkish stance from the U.S. central bank.

The highly awaited inflation report from the Labor Department on Thursday is expected to show U.S. consumer prices likely grew 6.5% year-on-year in December, from 7.1% a month ago, while core inflation grew 5.7% in December, from 6% in November.

While further evidence of an easing in price pressures could bolster hopes of the Fed pausing its rate hiking cycle soon, recent comments by some policymakers have supported the view that the Fed needs to remain aggressive in raising interest rates to fight inflation.

“(Investors) feel inflation is being tamed and that there’s more risk of not being in the market than there is of being in the market,” said Christopher Grisanti, chief equity strategist at MAI Capital Management in Cleveland.

“If there’s good inflation numbers, February may be the last hiking, or they (the Fed) may even pause.”

Money market participants see a 77% chance the Fed will raise the benchmark rate by 25 basis points to 4.50%-4.75% in February, and see rates peaking at 4.92% by June.

Wall Street’s main indexes rallied on Tuesday as Fed Chair Jerome Powell refrained from commenting on the outlook for interest rates ahead of the inflation data, but said the Fed’s independence was essential for it to battle inflation.

This week marks the start of the earnings season for S&P 500 companies, with Wall Street’s biggest banks expected to report lower quarterly profits amid risks of a recession due to monetary policy tightening.

At 10:05 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 100.21 points, or 0.30%, at 33,804.31, the S&P 500 (.SPX) was up 19.72 points, or 0.50%, at 3,938.97, and the Nasdaq Composite (.IXIC) was up 69.58 points, or 0.65%, at 10,812.21.

Home goods retailer Bed Bath & Beyond Inc (BBBY.O) jumped 31.2%, after logging gains in the previous session despite bleak quarterly results as retail investors speculated it could be a potential acquisition target and as short-sellers closed out bets.

Shares of airlines such as American Airlines Group Inc (AAL.O) and Spirit Airlines Inc (SAVE.N) reversed premarket losses to rise between 0.8% and 2.5%, as U.S. flights were slowly beginning to resume departures and a ground stop was lifted after the Federal Aviation Administration scrambled to fix a system outage overnight.

Advancing issues outnumbered decliners for a 3.99-to-1 ratio on the NYSE and a 2.24-to-1 ratio on the Nasdaq.

The S&P index recorded nine new 52-week highs and no new low, while the Nasdaq recorded 43 new highs and 11 new lows.

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