Investing.com - Wall Street closed higher despite a slump in retailers and renewed concerns about the Federal Reserve tightening after Fed Chairman Jerome Powell said the central bank would continue to trim its balance sheet.
The Dow Jones Industrial Average rose 0.51%, closing higher for a fifth-straight day. The S&P 500 gained 0.45%, while the Nasdaq Composite added 0.42%.
Powell said the Fed's balance sheet will be "substantially smaller," indicating the central bank will press ahead with its balance sheet wind-down operation, renewing investor concerns about monetary policy tightening.
On rates, however, the Fed chairman reiterated the central bank will be "patient," as it weighs the pace of global growth and domestic inflation.
Sentiment on stocks was also rocked by a slump in retailers after Macy’s (NYSE:M) revealed disappointing sales over the crucial holiday period and slashed its 2018 earnings outlook.
Macy's warned it expects no growth in net sales for the fiscal year 2018, a sharp contrast from its previous guidance for an increase in the range of 0.3% to 0.7%. Its shares slumped 18%.
Retailers Target (NYSE:TGT) and Kohl’s (NYSE:KSS) also slid, pushing the SPDR S&P Retail (NYSE:XRT) ETF 2% lower.
A rout in airlines, meanwhile, also threatened the five-day rally in the broader market, led by American Airlines (NASDAQ:AAL) as it cut its outlook on profit, raising fears that earnings may have peaked ahead of the quarterly earnings season, which gets underway in earnest next week.
But analysts at Cowen shrugged off the weakness in the sector on expectations that airlines will see margin expansion in 2019, driven by a "combination of continued revenue momentum and a recent decline in fuel costs."
Energy, meanwhile, ended the day unchanged as oil prices edged higher, but gains were held back by concerns over waning demand on signs of a continued slowdown in China, the world's largest importer of crude, and worries about U.S.-China trade.
The outlook on international trade was muddied somewhat as the White House is reportedly considering legislation that could grant President Donald Trump more unilateral power to impose tariffs on U.S. trading partners' products that carry higher import taxes, Bloomberg reported.
But the draft “United States Reciprocal Trade Act”, which some within the White House would like Trump to unveil in his State of the Union address later this month, could struggle to garner enough votes in Congress, according to Bloomberg.
Top S&P 500 Gainers and Losers Today:
Constellation Brands (NYSE:STZ), General Electric (NYSE:GE) and International Paper (NYSE:IP) were among the top S&P 500 gainers for the session.
Macy’s (NYSE:M), Kohl’s (NYSE:KSS) and L Brands (NYSE:LB) were among the worst S&P 500 performers of the session.