Wall Street is up but shaky trading undercuts earlier gains

NEW YORK (AP) — Stocks are higher on Wall Street Tuesday, but shaky trading in the afternoon means they’ve lost much of their big rally from the morning driven by hopes that the nation’s punishingly high inflation is easing.

The S&P 500 was 0.8% higher in afternoon trading after seeing an early 1.8% gain disappear completely and swing briefly to a loss of 0.1%. The Dow Jones Industrial Average was up 55 points, or 0.2%, to 33,591 after veering from a gain of 450 to a loss of 216. The Nasdaq composite was still leading the market and 1.6% higher, as of 2:23 p.m. Eastern time.

Stocks initially bounced at the open of trading following the latest economic report to suggest inflation continues to cool from its summertime peak, with the S&P 500 climbing to its highest level in two months. Treasury yields also eased on hopes that the slowdown in inflation could mean the Federal Reserve’s bitter, economy-crunching medicine for it could taper as well.

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But the gains all disappeared briefly in the afternoon following reports that Russian missiles crossed into Poland, which is a member of NATO.

Prices for crude oil and gold jumped as stock prices tumbled, an indication that traders were building bets for aftershocks from an escalation in the war in Ukraine. Markets then retraced some of their movements as the afternoon progressed.

Technology stocks and retailers had some of the biggest gains. Chipmaker Nvidia rose 2.8%. Walmart surged 7.4% after reporting strong financial results, raising its profit forecast and announcing an opioid settlement.

Prices at the wholesale level rose 8% in October from 12 months earlier, the fourth straight decline. Every measure of the latest inflation report came in cooler than economists expected. The data follows a report last week on consumer prices that also showed inflation continues cooling from its hottest levels in decades, albeit slowly.

“The improvement is simply encouraging,” said Mark Hackett, chief of investment research at Nationwide. “More importantly, what it’s doing is taking universal pessimism and starting to put some holes in that theory.”

Wall Street is closely watching inflation data that could impact how far the Federal Reserve will need to go in restraining the economy to tame inflation. The central bank has raised its key overnight rate by a big 0.75 percentage points at each of its last four meetings. That’s triple the usual amount.

The latest updates on inflation have investors betting that the Fed will raise rates by a half-percentage point at its meeting in December, according to CME Group.

The Fed has been aggressively raising interest rates to make borrowing more difficult and generally slow down spending to cool inflation. The strategy risks slowing economic growth too much and bringing on a recession. That fear has been hovering over Wall Street.

Bond yields, which have been hovering near multidecade highs, eased slightly. The yield on the two-year Treasury fell to 4.37% from 4.40% late Monday. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.81% from 3.85%.

Investors will get more updates on inflation’s impact on businesses and consumers this week with corporate earnings from big retailers. Home Depot rose slightly after reporting strong financial results and maintaining its sales growth forecast. Target reports its results on Wednesday and Macy’s reports its results on Thursday.

Wall Street will get a broader update on retail sales Wednesday when the government releases its report for October.

Joe McDonald and Matt Ott contributed to this report.

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