NEW YORK — The U.S. stock market is climbing again Tuesday on hopes for a coming cut to interest rates.
The S&P 500 rose 0.8% after breaking out of a morning lull, where it bobbed between small gains and losses. The Dow Jones Industrial Average was up 650 points, or 1.4%, with less than an hour remaining in trading, and the Nasdaq composite was 0.5% higher.
Stocks got a boost from easing yields in the bond market. Lower interest rates can cover up many sins in financial markets, including prices going too high, and hopes are high that the Federal Reserve will cut its main interest rate at its next meeting to juice the economy further.
A raft of mixed economic data on Tuesday left traders betting on a nearly 85% probability that the Fed will cut in December, according to data from CME Group. That’s roughly the same as a day before and up sharply from the coin flip’s chance that traders saw just a week ago.
One of Thursday’s reports said that shoppers bought less at U.S. retailers in September than economists expected. Another said confidence among U.S. consumers worsened by more than expected, a second signal that the economy could potentially use the help of lower interest rates.
Easier rates can boost the economy by encouraging households and companies to borrow more and investors to pay higher prices for investments than they would otherwise.
A third report, meanwhile, said that inflation at the wholesale level was a touch worse in September than economists expected, but a closely tracked underlying trend was slightly better. That’s important because lower interest rates can make inflation worse, and high inflation is the main deterrent that could keep the Fed from cutting rates.
After taking all the data together, economists suggested the Fed and its chair, Jerome Powell, could be leaning toward cutting rates on Dec. 10. The Fed has already cut rates twice this year in hopes of shoring up a slowing job market.
“Taking a pause on rate cuts would probably do more damage to sentiment than a cut would help,” according to Brian Jacobsen, chief economist at Annex Wealth Management, who also said “Powell doesn’t need to be the Grinch that stole Christmas.”
Easier interest rates can give particularly big boosts to smaller companies, because