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Stock Market Today - 5/17: Stocks End Higher On Growth Relief; Walmart Sounds Alarm on Inflation Impact

Stocks end higher Tuesday following a key reading of April retail sales even as Walmart sounds the alarm on the impact of surging inflation costs.

Updated at 4:20pm EST

Stocks finished higher Tuesday, while the dollar extended declines for a third consecutive session, as investors took solace from a rare bit of positive news from China's Covid crisis.

The Dow Jones Industrial Average ended up 431 points, or 1.34%, to 32,655, while the S&P 500, which is down 15.9% for the year, gained 2.02%. The tech-focused Nasdaq finished up 2.76%.

Early gains had been tempered, however, by weaker-than-expected first quarter earnings from Walmart  (WMT) - Get Walmart Inc. Report, as well as a warning on the impact of surging inflation to the bottom line of the world's biggest retailer.

The dollar's three-day retreat, while modest, provided a spark of investor optimism following news that Shanghai had recorded its third consecutive day with no new Covid infections, an important benchmark that could trigger the easing of restrictions on business and travel in China's biggest city.

Growth concerns remain paramount in global markets, with surging inflation and aggressive central bank rate signaling raising the specter of stagflation -- or recession -- in major economies around the world.

A path around that, at least in the United States, could come from consumer spending.

April retail sales rose 0.9% from the previous month to a collective $677.7 billion, the Commerce Department said, largely in line with the Street consensus forecast and the fourth consecutive monthly gain. 

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The March total was revised higher, to 1.4%, the Commerce Department report showed, from the original estimate of a 0.5% advance.

Stocks remain rate-sensitive for the moment, however, moving in tandem with moves in the Treasury bond market, where falling yields suggest deeper growth concerns and rising yields hint towards near-term economic optimism.

Benchmark 10-year Treasury note yields were last seen modestly higher on the session at 2.984% -- while the U.S. dollar index -- a broad indicator of investor caution -- fell 0.8% against a basket of its global peers to trade at 103.35 in overnight dealing.

The CME Group's FedWatch tool, meanwhile, suggests at least at 21.1% chance of a 75 basis point rate hike in July, despite assurance from Federal Reserve Chairman Jerome Powell that such a move is not being "actively considered" by his colleagues on the Open Markets Committee.

Powell, speaking at the Wall Street Journal's 'Future of Everything' event, said Tuesday that the Fed would not hesitate to keep raising rates until inflation comes down.

Walmart fell 11.35% after it posted weaker-than-expected first quarter earnings, and cut its full-year profit forecast, as surging costs ate into the bottom line of the world's biggest retailer. 

Home Depot  (HD) - Get Home Depot Inc. (The) Report, rose 1.7% after it posted stronger-than-expected first quarter earnings and boosted its full-year profit guidance as the world's biggest home retailer recorded record sales amid the still-elevated domestic housing market.

JD.com  (JD) - Get JD.com Inc. 京东 Report surged 8.8% on better-than-expected first quarter earnings as active users neared 600 million amid a resurgence in online retail activity following Covid-triggered lockdowns in some of China biggest cities. 

Twitter  (TWTR) - Get Twitter Inc. Report shares, meanwhile, extended their slide to an eighth consecutive session, falling 2.4%, as Elon Musk said the social media group must prove that spam and bot accounts comprise only a small portion of its user base for his $44 billion takeover to proceed.