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McDonald's warns on short-term inflation pressures
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Growth in U.S. labor costs slows in Q4
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Fed decision on interest rates on Wednesday
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GM up on robust forecast, Caterpillar hit by lower Q4 profit
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Indexes up: Nasdaq 0.86%, S&P 0.55%, Dow 0.18%
(Adds comments; updates details, prices)
By Johann M Cherian and Shreyashi Sanyal
Jan 31 (Reuters) -
U.S. stocks rose on Tuesday as labor cost data indicated
that the Federal Reserve's aggressive approach to taming
inflation was taking hold ahead of a decision by the central
bank, while gains on the Dow were limited by weak earnings
updates.
U.S. employment costs increased at their slowest pace in
a year in the fourth quarter as wage growth slowed, bolstering
expectations of the Fed slowing the pace of its interest rate
increases.
"The report was a little lower than expected and that seemed
to really spark a move in markets," said Randy Frederick,
managing director at Charles Schwab.
"It shows that the overall economy is slowing down, but
it should be a positive overall because it means that the Fed's
actions to quell inflation are actually working."
The Fed will decide on rates on Wednesday, with traders betting on a 25-basis-point hike (bps) at the end of the its two-day meeting, and a terminal rate of 4.9% in June. Ten of the 11 major S&P 500 sector indexes were up, with consumer discretionary rising 1.2% after a 7.2% gain in General Motors Co . The automobile conglomerate forecast stronger-than-expected earnings for 2023 and said it would cut $2 billion in costs. United Parcel Service jumped 4.2% on strong quarterly earnings, boosting the Dow Jones Transport Average index . Capping gains on the blue-chip Dow Jones Industrial Average was Caterpillar Inc , down 4.2% after reporting a drop in quarterly profit on higher manufacturing costs, while McDonald's Corp dropped 2.4% on warnings of short-term inflationary pressures.
"With additional earnings coming in this week, participants are a little concerned that the market got a little bit ahead of itself and so are a little cautious heading into the Fed meeting," said Robert Pavlik, senior portfolio manager at Dakota Wealth. At 12:05 p.m. ET, the Dow Jones Industrial Average was up 62.08 points, or 0.18%, at 33,779.17, the S&P 500 was up 22.13 points, or 0.55%, at 4,039.90, and the Nasdaq Composite was up 97.78 points, or 0.86%, at 11,491.59. PulteGroup Inc jumped about 9%, lifting the PHLX Housing index to a 10-month high, after its quarterly earnings surpassed Wall Street expectations aided by higher house prices.
The S&P 500 and the Dow are set to end January higher for the first time since 2019, while the Nasdaq is up more than 9% as appetite for growth stocks bounced back. Hopes of a downshift in the Fed's policy has eased worries of pressured valuations for the rate-sensitive group. As many as 165 S&P 500 companies have reported earnings for the fourth quarter. Earnings are expected to have fallen 2.4% for the quarter, compared with a 3% decline expected a day earlier, according to Refinitiv data. Advancing issues outnumbered decliners by a 3.81-to-1 ratio on the NYSE and by a 2.88-to-1 ratio on the Nasdaq. The S&P index recorded five new 52-week highs and no new low, while the Nasdaq recorded 62 new highs and 15 new lows. (Reporting by Johann M Cherian and Shreyashi Sanyal in Bengaluru Editing by Sriraj Kalluvila and Maju Samuel)
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