Wall Street closed higher on Wednesday as investors were hopeful that the United States and China could iron out a trade deal and as benign inflation data suggested the Federal Reserve would hold interest rates steady in the near term.
All three major equity indexes gained ground, with the S&P 500 and the Nasdaq posting their fourth consecutive advances. For the second straight day, the S&P 500 closed above its 200-day moving average, a key technical level.
Stocks briefly pared gains following a late-morning tweet by U.S. Senator Marco Rubio saying he would introduce a bill to “tax corporate buybacks the same way as dividends.”
In Beijing, Treasury Secretary Steven Mnuchin said “so far, so good,” regarding ongoing talks aimed at resolving the U.S.-China trade dispute, adding he hoped for “productive” meetings in the days ahead.
The Labor Department reported consumer prices were unchanged for the third consecutive month in January, in a sign the Fed could hold interest rates steady for the time being.
Fourth-quarter earnings season is approaching the finish line, with more than two-thirds of the S&P 500 having reported.
While analysts now see fourth-quarter earnings growth of 16.6 percent, the outlook for the current quarter is less upbeat. Fourth-quarter profit is projected to fall 0.3 percent from a year ago, marking the first loss since the earnings recession that ended in 2016, according to Refinitiv data.
Of the 11 major sectors in the S&P 500, all but utilities and communications services ended the session in positive territory. Energy was the largest percentage gainer as oil prices saw their biggest increase since late January.
Groupon fell 11.1 percent, one the biggest losers on the Nasdaq, as reduced traffic led to a fourth-quarter profit miss.
Teva Pharmaceuticals fell 7.8 percent after forecasting a weaker-than-expected 2019 due to new competition for branded drugs.
General Electric rose 3.9 percent following news the conglomerate booked the most orders for electricity-generating gas turbines in 2018.
Levi Strauss filed documents for an IPO after more than three decades as a privately-held company. Rivals Abercrombie & Fitch, Gap and American Eagle Outfitters were lower on the news.
Cisco Systems rose in after-market trading after posting better-than-expected quarterly results as the network gear maker benefited from its shift to newer businesses.
Approximately 6.91 billion shares changed hands on the major domestic equity exchanges, as compared to the 7.45 billion share average over the past 20 trading days.
The Consumer Price Index or CPI was unchanged for a third straight month in January, leading to the smallest annual increase in inflation in more than 1-1/2 years. This in turn could enable to hold interest rates steady for a time.
The Labor Department said on Wednesday that last month’s CPI was held in check by the lower price of gasoline, which offset increases in the cost of food and rents.
In the 12 months through January, the CPI rose 1.6 percent, the smallest gain since June 2017. The CPI increased 1.9 percent on a year-on-year basis in December.
Excluding the volatile food and energy components, the so-called core CPI gained 0.2 percent, rising by the same margin for a fifth straight month. In the 12 months through January, the core CPI rose 2.2 percent for a third straight month.
Despite the increases in the core CPI, underlying inflation remains moderate. The Fed, which has a 2 percent inflation target, tracks a different measure, the core personal consumption expenditures (PCE) price index, for monetary policy.
The core PCE price index increased 1.9 percent on a year-on-year basis in November after rising 1.8 percent in October. It hit 2 percent in March 2018 for the first time since April 2012. PCE price data for December will be released on March 1. It was delayed by a five-week partial shutdown of the federal government that ended on Jan. 25.
With the January inflation report, the government started quality adjusting the CPI series related to telecommunications services such as land-line telephones, internet, cable and satellite television, to account for rapid technological change.
Inflation is remaining moderate despite a tightening labor market, in part because of slowing economic growth in China and Europe, which is helping to lower oil prices.
In January, gasoline prices fell 5.5 percent after a decline of 5.8 percent during December. Food prices increased 0.2 percent, rising for a third straight month.
Food consumed at home edged up 0.1 percent last month. There were increases in the prices of poultry, eggs, fish and beef. However, consumers paid less for fruits, vegetables, cereals and dairy products.
Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.3 percent in January after gaining 0.2 percent in the prior month. The cost of postage stamps jumped 1.7 percent and households paid more for land-line telephone services.
Healthcare costs rose 0.2 percent after advancing 0.3 percent in December, with doctor visits costing more. Apparel prices jumped 1.1 percent last month, the biggest increase since February 2018.
There were also increases in the prices of new motor vehicles as well as used cars and trucks. Airline fares dropped 0.9 percent. The cost of motor vehicle insurance fell for a third straight month.