ABC News Today

Wall Street stocks recovered from an early drop to close higher on Monday, extending the market’s recent winning ways as investors await several updates from retailers this week.

The S&P 500 rose 0.4% after dropping 0.5% earlier. The benchmark index has risen for four straight weeks and is up 13.5% so far in the third quarter, although it is still the lowest for the year.

The Dow Jones Industrial Average rose 0.5% and the Nasdaq rose 0.6%. Shares of smaller companies also rose, with the Russell 2000 index up 0.2%.

The market got off to a rocky start as traders reacted to news overnight that China’s central bank cut a key interest rate, acknowledging that more needs to be done to shore up its economy. The move is the latest warning for markets already on edge from record inflation and recession fears in the US and elsewhere.

China is the world’s second largest consumer of crude oil, so the news weighed on energy prices. US crude prices fell 2.9% on concerns about the global economy and weighed heavily on energy stocks. Chevron fell 1.9%.

Treasury yields fell as a report showed manufacturing in New York state unexpectedly contracted. The yield on the 10-year Treasury, which banks use to set mortgage rates, fell to 2.79 percent from 2.83 percent on Friday afternoon.

Some big banks fell as bond yields fell. Capital One fell 1.8%.

Still, all but two of the S&P 500’s 11 sectors closed higher. Technology stocks, retailers and other companies that rely on direct consumer spending accounted for a large portion of the gains. Visa rose 2.4% and Costco rose 1.6%.

Moderna rose 3.3% after British regulators approved an updated version of its COVID-19 vaccine.

Overall, the S&P 500 rose 16.99 points to 4,297.14. The Dow added 151.39 points to 33,912.44. The Nasdaq gained 80.87 points to 13,128.05. The Russell 2000 rose 4.73 points to 2,021.35.

The market’s choppy start to the week follows four straight weeks of gains for the benchmark S&P 500 on hopes that inflation will peak and the Federal Reserve may ease its aggressive rate hikes. The central bank has raised short-term interest rates to help slow economic growth and cool the highest inflation in 40 years.

Wall Street worries that the Fed could cut back too hard and send the economy into recession, and any sign that inflation may be peaking or falling has helped ease some of those worries.

Investors are also closely watching how inflation affects businesses and consumers. Spending has slowed and the overall economy has already contracted for two straight quarters. Several major retailers will give investors more details on how their businesses are holding up when they report earnings this week.

Home Depot and Walmart report results Tuesday, and Target’s results are due Wednesday. On July 26, the S&P 500 fell more than 1% after Walmart warned that inflation was hurting its customers’ purchasing power and said its second-quarter profit would be lower than previously forecast.

Wall Street will look again at the health of the retail sector and consumer spending when the Commerce Department releases its July retail sales report on Wednesday. Economists polled by FactSet expect modest growth of 0.2% from June, when sales rose 1%. This increase largely reflected higher prices, particularly for gas. But it also showed that Americans are continuing to spend, providing crucial support for the economy, although some economists suggest it comes mostly from higher-income households.