Wall Street ends higher as retail sales slump feeds hopes for rate cuts

U.S. stocks closed higher on Thursday as retail sales data declined more than expected, feeding hopes the Federal Reserve will soon start cutting interest rates in coming months.

A Commerce Department report showed U.S. retail sales dropped 0.8 per cent in January, weighed by declines at auto dealerships and gasoline service stations.

The data had investors less stressed about hotter than expected inflation data that had sent stocks lower on Tuesday.

"Investors are cheering the fact that we got a weaker-than-anticipated retail report," said Neville Javeri, a portfolio manager at Allspring Global Investments. "Maybe the consumer is slowing, maybe this negates the higher CPI number we saw a couple of days ago."

"It shows that maybe the economy might be a little weak and so that's a sort of a bad news that is potentially good news because it means the Fed is more likely to cut rates," said Thomas Martin, senior portfolio manager at GLOBALT.

Bets for a rate cut of at least 25 basis points in May edged up to 40 per cent, while the odds for June stood at roughly 79 per cent, according to the CME Group's FedWatch Tool.

A Labor Department report showed initial claims for state unemployment benefits stood at 212,000 for the week ended Feb. 10, lower than the estimated 220,000.
On Friday, a producer price index (PPI) report will provide more clues about the economy.

The S&P 500 gained 29.05 points, or 0.58 per cent, to end at 5,029.67 points, while the Nasdaq Composite gained 47.03 points, or 0.30 per cent, to 15,906.17. The Dow Jones Industrial Average rose 350.07 points, or 0.91 per cent, to 38,774.73.

Alphabet dropped 2.17 per cent after investment firm Third Point dissolved its stake in the megacap.

Apple shares were pressured as Warren Buffett's Berkshire Hathaway BRKa.N trimmed its large stake in the iPhone-maker and Soros Fund Management entirely dissolved its stake. But the stock bounced in late trading and closed down just 0.1 per cent.

Investor optimism grew as 80.3 per cent of S&P 500 companies have now beaten earnings expectations, LSEG data showed, surpassing the annual 76 per cent average.

CBRE Group soared 8.5 per cent after forecasting annual profit largely above estimates, driving a rise in the S&P 500 real estate sector.

Wells Fargo jumped 7.2 per cent after the bank said the U.S. Office of the Comptroller of the Currency has terminated a 2016 consent order over the bank's sales practices misconduct.

Recently underperforming sectors such as utilities, materials and energy  notched strong gains. The small-cap Russell 2000 Index also advanced 2.3 per cent.

Cisco Systems fell 2.43 per cent as it announced plans to cut 5 per cent of its global workforce and lowered its annual revenue target.

Deere & Co the world's largest farm-equipment maker, lost 5.2 per cent after cutting its 2024 profit forecast. West Pharmaceutical Services tumbled 14.1 per cent after forecasting full-year results below estimates.

Advancing issues outnumbered decliners by a 5.3-to-1 ratio on the NYSE, while on Nasdaq advancing issues outnumbered decliners by a 2.4-to-1 ratio.

On U.S. exchanges 12.24 billion shares changed hands compared with the 11.7 billion moving average for the last 20 sessions.