A solid U.S. economy helped Wall Street regain its footing Wednesday after a two-day slide that wiped out all of the Dow Jones Industrial Average’s gains this year.
The blue-chip index, which was up slightly for much of the day, flattened at the close of New York trading, while the broader S&P 500 added 0.3 percent and the tech-heavy Nasdaq rose .09 percent, benefiting from signals of U.S. strength including a low unemployment rate and upbeat corporate earnings reports; Foot Locker topped profit estimates while apparel chain Gap posted a 6.5 percent increase in sales, which reached $4.1 billion.
“The U.S. economy continues to perform exceptionally well,” Josh Feinman, chief economist at wealth management firm DWS, said in a report. “Growth has been strong, firmly above potential, labor markets are near full employment — if not slightly beyond — and still tightening, and inflation is back near the Federal Reserve’s target but not overshooting.”
The pace of that expansion isn’t likely to be sustainable, though. As Feinman put it, “this may be as good as it gets.” Financial conditions have been tightening, stock markets have experienced bouts of volatility, and the impact of tax cuts that buoyed this year’s investments will diminish over time, he said.
Earlier in the week, worries about the broader global economy had weighed on all three major U.S. indexes, with concern that a trade standoff between the U.S. and China would exacerbate the impact of higher interest rates and the United Kingdom’s looming exit from the European Union.
The Dow shed 947 points, or 3.7 percent, in two harrowing days of trading, while the S&P 500 dropped 3.5 percent and the Nasdaq fell 4.7 percent.
Wall Street analysts and economists alike have expressed reservations about the Federal Reserve’s interest rate increases, which President Trump himself has criticized sharply. The central bank is widely expected to raise its benchmark rate another 25 basis points in December.
The increase, the ninth since rates were cut to nearly zero during the 2008 financial crisis, would take rates to a range of 2.25 to 2.5 percent.
Next year’s rate increases may be affected by fallout from Trump’s trade standoff with China. His administration has imposed tariffs on $250 billion of the country’s imports and plans to raise a 10 percent levy on $200 billion of them to 25 percent in January.
While some investors hope the two countries will reach detente at a G-20 meeting in Buenos Aires at the end of November, U.S. Trade Representative Robert Lighthizer issued a report Tuesday critical of Beijing’s behavior since the U.S. began imposing tariffs.
“China has not fundamentally altered its unfair, unreasonable, and market-distorting practices,” he said in a statement.
