U.S. stocks rose on Tuesday, buoyed by strong earnings reports from several major retailers, including Target. The S&P 500 gained 0.2%, the Dow Jones Industrial Average rose by 88 points, or 0.2%, and the Nasdaq composite edged up 0.1%.

Investors are cautiously optimistic, awaiting a speech by Federal Reserve Chair Jerome Powell on Friday. The market is hopeful for insights into the Fed’s future plans regarding interest rate cuts, which could influence market direction.

Retailers Drive Gains

Target’s stock surged 15.4% after the retailer reported a spring season sales increase exceeding expectations, driven by both in-store and online traffic. The company also exceeded profit estimates and raised its full-year forecast, bolstering investor confidence.

TJX Companies, the parent of TJ Maxx and Marshalls, saw its stock climb 4.5% after reporting better-than-expected profit for the latest quarter. The company also raised its profit forecast for the year, citing strong customer transactions across all divisions, indicating robust consumer demand.

Macy’s, however, struggled despite beating profit expectations. The department store chain’s stock dropped 12% as revenue fell short of forecasts, leading the company to lower its sales outlook for the remainder of the year. Management attributed this to a “more discriminating consumer,” highlighting concerns about consumer spending, particularly among lower-income households.

Economic and Market Outlook

These retail performances reflect broader economic concerns. While inflation has slowed, prices remain high, and many U.S. households have depleted pandemic-era savings. This raises concerns about whether consumer spending can sustain economic growth, especially with the Federal Reserve’s high-interest rates making borrowing more expensive.

These concerns have fueled widespread expectations for the Fed to lower its main interest rate next month, marking the first rate cut since the pandemic-induced crash of 2020. The question now is how much and how quickly the Fed will act. Treasury yields have been declining since April in anticipation of these rate cuts, with the yield on the 10-year Treasury falling to 3.79% from 3.81% on Tuesday.

Corporate Moves and Global Markets

Coal companies Arch Resources and Consol Energy both saw significant gains after announcing an all-stock “merger of equals.” The combined company will operate under the name Core Natural Resources. Following the merger announcement, Arch Resources climbed 5.9%, while Consol Energy gained 6%, as investors reacted positively to the potential synergies of the deal.

Globally, stock markets presented a mixed picture. Japan’s Nikkei 225 fell by 0.3%, a modest move compared to recent dramatic swings, including its worst day since the 1987 Black Monday crash. Meanwhile, European markets showed modest gains, reflecting a more stable environment abroad.

Conclusion

Today’s market performance reflects a complex and dynamic environment where strong earnings reports from key retailers like Target and TJX are helping to sustain market momentum. However, concerns about consumer spending and the future direction of interest rates continue to weigh on investor sentiment. As the week progresses, all eyes will be on the Federal Reserve and Jerome Powell’s upcoming speech, which could set the tone for the markets in the weeks ahead.