Bell Direct market analyst Grady Wulff said that despite retail giant Harvey Norman missing expectations and cutting its dividend, the ASX was broadly boosted by a rebound in retail sales.

The Australian Bureau of Statistics said on Tuesday that retail turnover rose 1.9 per cent in January, following a 4 per cent fall in December.

“The latest retail sales figures have given confidence to investors that retailers are weathering the high-interest rates and buoyed some market rallies,” Wulff said.

She said the strength in energy stocks could partly be attributed to a 2 per cent rise in the price of crude oil, while weakness in utilities was likely to reflect a moderation of recent gains in the sector.

“Utilities have rallied recently, especially after Origin received a revised takeover offer last week, so investors are likely taking the profits today,” she said.

On Wall Street, stocks steadied themselves following their worst week since early December.

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The S&P 500 rose 0.3 per cent to 3982.24 for just its second gain in the last seven days. The Dow Jones gained 0.2 per cent while the Nasdaq composite climbed by 0.6 per cent. The S&P/ASX 200 shed 1.1 per cent on Monday.

US stocks have struggled in February after a strong start to the year as reports have shown inflation and much of the overall economy are staying more resilient than expected. While the strong economic data calms fears that a recession may be imminent, it has also forced Wall Street to raise its forecasts for how high the Federal Reserve will take interest rates and how long it will keep them there.

High rates can drive down inflation, but they also raise the risk of a recession because they slow the economy. They also hurt prices for stocks and other investments.

The heightened expectations for rates have been most evident in the bond market, where yields have shot higher in recent weeks. On Monday, the yield on the 10-year Treasury slunk back a bit, which eased some of the pressure on stocks.

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Economists have been expecting more softness in the economy after the Fed jacked up rates last year at the fastest pace in decades. But reports on everything from the job market to spending by consumers to inflation itself have been coming in firmer than expected over the past few weeks.

The fear is that if the economy stays on strong footing, it could feed into upward pressure on inflation. That’s why expectations on Wall Street have swung so hard, from earlier thinking the Fed could soon take it easier on interest rates to now believing it could raise them above 5.25 per cent.

The Fed’s key overnight rate is now in a range of 4.50 per cent to 4.75 per cent, up from virtually zero at the start of last year.

Tweet of the day:

Quote of the day:

“Coffee culture is still something that people will continue on for some period of time,” said Milklab manufacturer Noumi’s chief executive, Michael Perich, in reference to a looming consumer spending crunch.

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With AP

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