NEW YORK: Wall Street ended higher on Tuesday, with gains in Delta Air Lines and other travel stocks, while the Federal Reserve began its two-day policy meeting amid investors’ worries about high oil prices and the Middle East conflict.
Shares of airlines and travel companies rebounded from losses in recent weeks related to the US and Israeli attack on Iran and surging energy prices.
Delta rallied more than six per cent and American Airlines Group gained 3.5 per cent after both companies raised their revenue guidance for the current quarter. United Airlines rose 3.2 per cent.
Norwegian Cruise Line Holdings climbed over two per cent and Expedia Group jumped more than four per cent.
FED POLICYMAKERS WEIGH INFLATION CONCERNS
Concerns of prolonged supply disruptions due to the closure of the Strait of Hormuz shipping route have kept crude prices near US$100 a barrel. Worries about high oil prices will be in sharp focus as Fed policymakers weigh inflation concerns against signs of a weakening jobs market.
The central bank started its two-day monetary policy meeting on Tuesday and traders expect the Fed to keep borrowing costs unchanged in its decision on Wednesday.
Rate futures suggest expectations of one 25-basis-point cut toward the end of the year, according to London Stock Exchange Group (LSEG)-compiled data, down from around two before the war.
“The place where we could get in trouble with this is if the Fed views the oil shock as inflationary and decides to respond with more hawkish monetary policy,” said Ross Mayfield, an investment strategist at Baird Private Wealth Management.
“The best-case scenario would be some confirmation tomorrow that the Fed is monitoring the situation, but kind of adheres to what they’ve done in the past, which is try to look through big oil shocks.”
Worries about pricey aftificial intelligence-related stocks, along with uncertainty about the Middle East conflict, have dropped the S&P 500 about four per cent from its record high close on Jan 27.
The benchmark is trading at about 21 times expected earnings, down from over 23 in November, but still above its average forward price-earnings ratio of 19 over the past five years, according to LSEG data.
The Reserve Bank of Australia hiked interest rates for a second straight month, warning of a material risk to inflation due to the Middle East war. Ride-hailing app Uber rallied 4.2 per cent after announcing plans to roll out robotaxis in 28 cities starting next year, powered by Nvidia’s autonomous driving software.
The S&P 500 financials sector index rebounded 0.5 per cent from sharp losses in the week before, when worries about private credit quality rattled investors. Asset manager Blackstone rose 4.6 per cent, Apollo Global gained 5.3 per cent and KKR rose 3.3 per cent.
The S&P 500 climbed 0.25 per cent to end the session at 6,716.09 points. The Nasdaq gained 0.47 per cent to 22,479.53 points, while the Dow Jones Industrial Average rose 0.10 per cent to 46,993.26 points.
Eight of the 11 S&P 500 sector indexes rose, led by energy , up 1.02 per cent, followed by a 1 per cent gain in consumer discretionary.
Volume on US exchanges was light, with 16.9 billion shares traded, compared to an average of 19.8 billion shares over the previous 20 sessions.
Energy companies Occidental and ConocoPhillips rose about one per cent each, tracking higher crude prices.
Honeywell International dipped 1.3 per cent after the industrial company said the Middle East conflict could affect its first-quarter revenue. The conflict has also delayed a planned summit between the US and China on President Donald Trump‘s request.
Eli Lilly fell nearly six per cent after brokerage HSBC downgraded the drugmaker to “Reduce” from “Hold.”
Advancing issues outnumbered falling ones within the S&P 500 by a 1.7-to-one ratio. The S&P 500 posted 21 new highs and two new lows; the Nasdaq recorded 51 new highs and 137 new lows.
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