Stocks tick higher on Wall Street as the inflation report looms

Stocks traded higher in quiet Wall Street trading on Tuesday ahead of some potentially market-moving reports scheduled for later in the week.

The Standard & Poors 500 index rose 27.16 points, or 0.7%, to 3,919.25 after a day of swinging between small gains and losses. The Dow Jones industrial average gained 186.45, or 0.6%, to 33,704.10, and the Nasdaq composite climbed 106.98, or 1%, to 10,742.63.

The stock market has started 2023 on a positive note on hopes that cooling inflation and a slowing economy may prompt the Federal Reserve to ease its market-shattering rate hikes. The Fed has been raising rates at a furious pace since early last year in hopes of bringing the country’s painful inflation under control. Such moves threaten to trigger a recession and hurt investment prices.

Investors were hoping for some clues about where the Fed is headed from its chairman, Jerome H. Powell, who made comments at a forum in Stockholm on Tuesday. But he gave little news about rates.

The next big marker for the market will be Thursday’s update on how bad inflation was last month at the consumer level. Economists expect US inflation to slow further from 7.1% in November to 6.5% and peak at over 9% in the summer.

A worse-than-expected reading could dash growing hopes on Wall Street that the Fed will soon halt its rate hikes and perhaps even cut rates by the end of the year. Some investors see the economy successfully walking the tightrope to slow enough to stamp out high inflation, but not so much as to trigger a painful recession.

Past rate hikes and high inflation have already hurt economic activity around the world, and the Fed has pledged to keep rates high for a while to make sure the work on inflation gets done. It does not foresee any tariff reductions until 2024.

The World Bank said in its annual report on Tuesday that the global economy will come dangerously close to recession this year.

It usually takes a while for rate hikes to be fully felt in the economy. That could shift a recession into the second half of the year, said Barry Bannister, chief equity strategist at Stifel. The global economy could also benefit from strengthening in China as it lifts restrictions designed to keep COVID-19 at bay but hurts the economy.

You look at a pretty good six months where things get better on the margins and then the problems start to kick in, Bannister said.

In the meantime, major U.S. companies will show investors later this week how much profit they made in the last three months of 2022. Hot inflation squeezes customers’ wallets and increases costs for companies, jeopardizing their revenues.

Macys and several other companies have issued warnings about their fourth quarter 2022 and 2023 results.

Troubled household goods retailer Bed bath & beyond on Tuesday reported weaker sales for the last quarter than analysts had expected, though the size of the loss was not as bad as Wall Street predicted. The stock rose 27.8% after it also announced cost cuts to save money, including as it considers filing for bankruptcy.

Job cuts also continue at technology-focused companies, a notable weak spot in what was otherwise a healthy US job market. The ongoing collapse of crypto prompted Coinbase to say it would cut 20% of its workforce. The stock rose 13%.

Several major banks will report their final quarter results on Friday, including Bank of America and JPMorgan Chase. Delta Air Lines and UnitedHealth Group will also report results on Friday. Analysts are predicting this could be the first year-over-year drop in earnings per share for S&P 500 companies since 2020.

Bond yields rose. The yield on the 10-year Treasury bond, which helps set it up mortgage ratesclimbed to 3.61% from 3.53% late Monday.

European markets fell and Asian markets closed mixed overnight. The price of crude oil rose.