Wednesday, May 18, 2016

Wall Street turns higher as bank stocks offset retail shares

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 16, 2016.

(Reuters) - Wall Street reversed course to trade slightly higher on Wednesday as the prospect of higher interest rates sent financial stocks up, offsetting a fall in retail shares.

The minutes from the Federal Reserve's April meeting, scheduled to be released at 2 p.m. ET (1800 GMT), could give clues on the path of rate hikes.

"There may be some nugget in the minutes that confirms what two Fed governors mentioned yesterday," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

Dallas Fed President Robert Kaplan said on Tuesday he will advocate for a hike in June or July. Two other Fed officials said they expect up to three increases this year.

"If others insinuate the same, that could set the market up again for some rough activity," Luschini said.

The central bank next meets on June 14-15 but chances of a hike in June are slim. Traders see a 58 percent probability of a rate hike after the Fed's November meeting, up from about 42 percent on Monday, according to the CME FedWatch tool.

April data on Tuesday showed the biggest rise in U.S. consumer prices in more than three years as gasoline prices and rents rose, while other data showed housing starts and industrial production rebounded strongly.

The strong data and a recovery in oil prices to seven-month highs have stoked expectations that inflation will rise further. The Fed has a 2 percent inflation target.

At 10:55 a.m. ET, the Dow Jones industrial average .DJI was up 3.59 points, or 0.02 percent, at 17,533.57, the S&P 500 .SPX was up 2.13 points, or 0.1 percent, at 2,049.34 and the Nasdaq Composite .IXIC was up 23.61 points, or 0.5 percent, at 4,739.34.

Five of the 10 major S&P sectors were higher, with the financial index's .SPSY 1.33 percent rise leading the advancers. JPMorgan's (JPM.N) 2.9 percent rise provided the biggest boost to the sector.

Retail stocks, which were roiled last week following poor results from department stores, remained under pressure after Target (TGT.N) fell 8.7 percent at $67.21 as its quarterly sales missed expectations.

The consumer staples' .SPLRCS 0.8 percent fall made it the biggest laggard.

Dow-component Wal-Mart Stores (WMT.N), which reports results on Thursday, was also down 3.1 percent at $63.10. Costco Wholesale (COST.O) slipped 2.6 percent to $139.89.

Staples (SPLS.O) was up 1.3 percent at $8.39, while Lowe's (LOW.N) rose 2.7 percent to $ 78.07 after the companies' quarterly sales beat expectations.

Hormel Foods (HRL.N) was down 7.1 percent at $36.03 after the company's profit came missed market estimates.

Tesla Motors (TSLA.O) was up 4.5 percent at $213.90 after Goldman Sachs upgraded the electric car maker's stock to "buy" from "neutral."

Goldman Sachs on Tuesday downgraded equities to "neutral" over a 12-month time-frame, saying, "until we see sustained signals of growth recovery, we do not feel comfortable taking equity risk."

Advancing issues outnumbered decliners on the NYSE by 1,387 to 1,378. On the Nasdaq, 1,572 issues rose and 976 fell.

The S&P 500 index showed 4 new 52-week highs and 7 new lows, while the Nasdaq recorded 9 new highs and 34 new lows.

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