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Federal Reserve gives stocks a boost; technology and retail shares rally

Federal Reserve gives stocks a boost; technology and retail shares rally
The Dow Jones industrial average rose 52.40 points, or 0.2%, to 24,886.81. (Mary Altaffer / Associated Press)

U.S. stocks turned higher Wednesday after the Federal Reserve indicated it's not in too much of a hurry to raise interest rates. Retailers and technology companies led the way as the market erased some early losses.

Stocks opened lower after a business survey suggested that the eurozone economy might remain weak longer than experts expected. Investors bought U.S. and European government bonds, which pushed down yields and interest rates and hurt bank stocks.

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The market turned higher after the Fed released minutes from its early-May meeting. Officials concluded that the Fed should be on track to keep raising interest rates gradually, and some said it wouldn't be a problem if inflation briefly went past the Fed's target rate of 2%. That suggests the Fed won't raise interest rates too quickly. A quick rise in interest rates is a prospect that worries investors because it would slow down economic growth.

"Investors are sort of nervous around an overly aggressive Fed at this point in the cycle maybe throwing us into a recession," said Katie Nixon, chief investment officer at Northern Trust Wealth Management.

The Standard & Poor's 500 index rose 8.85 points, or 0.3%, to 2,733.29. The Dow Jones industrial average rose 52.40 points, or 0.2%, to 24,886.81. The Nasdaq composite climbed 47.50 points, or 0.6%, to 7,425.96. The Russell 2000 index of smaller-company stocks edged up 2.37 points, or 0.1%, to 1,627.61.

Federal Reserve officials left interest rates unchanged in early May, and investors expect they will raise those rates in mid-June. The central bank's members discussed concerns such as rising wage pressures and possible negative reactions to the Trump administration's trade policies but didn't change their overall views.

The central bank has said it expects to raise rates a total of three times this year; some experts believe it will raise rates as many as four times. Nixon said she expects only two rate increases. She said the Fed might leave rates alone after June if it sees signs the economy is slowing a bit as the effects of last year's tax cuts fade.

Tiffany sparkled in the first quarter as the jewelry company's earnings and sales blew past Wall Street projections. The company also said it's planning to buy back $1 billion in its own stock. Its stock jumped 23.3% to $126.05. Also rising after its quarterly report was Ralph Lauren, which jumped 14.3% to $133.33.

Target slumped 5.7% to $71.17 after its first-quarter profit fell short of expectations. The big-box retailer said more customers visited its stores and sales improved, but it's spending a lot of money to try to reinvent itself to better compete with Amazon. Target plans to spend $7 billion through 2020 to update stores and open smaller locations in urban markets.

Home improvement retailer Lowe's had a mostly disappointing first quarter as harsh winter weather cut into the traditional spring sales season, but the company forecast stronger sales growth for the rest of the year. The stock surged 10.4% to $94.69. Lowe's stock and its sales have lagged behind Home Depot's, but it made up ground Wednesday.

The IHS Market purchasing managers' index, a broad gauge of business activity in Europe, fell to its lowest level in 18 months in May. Although the European economy is still growing, investors had hoped for signs the doldrums were clearing.

Germany's DAX slid 1.5%, France's CAC 40 fell 1.3%, and the British FTSE 100 lost 1.1%. Investors bought European government bonds, pushing prices higher and yields lower in Germany, Spain, France and Britain.

Bond prices climbed in the United States as well. The yield on the 10-year Treasury note fell to 2.99% from 3.06%. With interest rates in decline, banks lost ground.

Bank stocks climbed Tuesday before Congress passed a bill easing some of the regulations passed after the 2008 financial crisis. President Trump is expected to sign it into law. Real estate investment trusts, utilities and other stocks that pay large dividends rose. Those stocks are often considered alternatives to bonds, and investors who want income often buy them when bond yields decrease.

Comcast said that it is preparing an all-cash offer for 21st Century Fox's entertainment divisions and that it plans to bid more than the $52.4 billion Disney offered. Comcast didn't disclose other details about its plans. Fox shares rose 1.6% to $38.77 while Comcast fell 1.9% to $31.88 and Disney slid 1.1% to $102.89

Hewlett Packard Enterprise sank 10.5% to $15.58. The maker of data-center hardware reported a strong quarter but gave up some of its gains from earlier in the year.

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Benchmark U.S. crude fell 0.5% to $71.84 a barrel in New York. Brent crude, used to price international oils, rose 0.3% to $79.80 a barrel in London.

Wholesale gasoline fell 0.4% to $2.26 a gallon. Heating oil rose 0.4% to $2.29 a gallon. Natural gas rose 0.2% to $2.91 per 1,000 cubic feet.

The dollar fell to 110.07 yen from 111.02 yen. The euro fell to $1.698 from $1.1779.

Gold fell 0.2% to $1,289.60 an ounce. Silver fell 1% to $16.41 an ounce. Copper slid 2% to $3.07 a pound.

Japan's benchmark Nikkei 225 index fell 1.2%, South Korea's Kospi gained 0.3%, and Hong Kong's Hang Seng lost 1.8%.

UPDATES:

2:30 p.m.: This article was updated with closing prices, context and analyst comment.

7:25 a.m.: This article was updated with market prices and context.

This article was originally published at 7:05 a.m.

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