Americans are missing out on $21 billion worth of gift cards and store credits.
Americans are leaving unused gift cards and store credits worth $21 billion on their tables, a survey says. AFP / Frederic J. BROWN

Wall Street stocks resumed their upward climb Wednesday, shrugging off a key warning sign in the Treasury bond market and barreling higher following strong results from retailers.

US stocks finished with solid gains for the third out of four sessions on a day in which European bourses also rallied.

Wall Street was in positive territory the entire day and did not move appreciably near the end of the session, when yields on the two- and 10-year Treasury notes inverted briefly, a harbinger of past recessions and a trigger for a major selloff earlier this month.

Strong earnings from US big-box chains Target and Lowe's, coupled with other good US retail sales reports, "helped mitigate the 'recession fear' communicated previously on the first inversion of the 2s10s spread, because they underscored for the market that the US consumer is still in good shape," said analyst Patrick O'Hare in an email.

Investors believe the flattening or inversion has been precipitated other factors in Europe and Japan rather than "by a trade of true economic angst pertaining to near-term economic prospects for the US."

A strong indicator of US consumer resilience was a blowout earnings report from Target, Walmart's smaller rival, which surged more than 20 percent after reporting higher profits on increased sales and consumer traffic.

"With both Target and Walmart producing good sets of numbers, the middle American consumer is clearly alive and well," said GlobalData Retail analyst Neil Saunders.

Minutes from the Federal Reserve's July 30-31 policy meeting said the US central bank will remain flexible and interest rates will not be on a "preset course" in the face of persistent risks from trade uncertainty and weak global growth.

On July 31, policymakers cut the key interest rate for the first time in more than a decade, a move characterized in the minutes as "part of a recalibration... or mid-cycle adjustment."

The minutes "didn't dissuade investors from the concept that the Fed might be lined up to cut rates again at some point this year," said Art Hogan chief market strategist at National Securities.

The minutes come ahead of a much-anticipated appearance Friday by Fed Chair Jerome Powell at an annual central bank gathering in Jackson Hole, Wyoming.

Short-lived crisis?

Key European equity markets climbed more than one percent.

That included Milan's FTSE MIB index which rallied as Italian President Sergio Mattarella began talks with key players in a bid to end political limbo in the eurozone's number three economy.

The index had dived 1.1 percent on Tuesday after the shock resignation of prime minister Giuseppe Conte.

Investors appeared to believe the crisis would be short-lived with the much-watched gap between German and Italian bond yields shrinking, indicating the markets do not perceive significant risk at this stage.

"If they manage to form a new government, it would be welcomed with some caution by other EU leaders who might see it as an opportunity to avoid a showdown over Italy's budget in the next few months," said the director of Future Europe Initiative, Benjamin Haddad.

VTB analyst Neil MacKinnon was more downbeat. "There is an increasing risk of a fresh eurozone debt and banking crisis," he cautioned.

Key figures around 2040 GMT

New York - Dow: UP 0.9 percent at 26,202.73 (close)

New York - S&P 500: UP 0.8 percent at 2,924.43 (close)

New York - Nasdaq: UP 0.9 percent at 8,020.21 (close)

London - FTSE 100: UP 1.1 percent at 7,203.97 (close)

Frankfurt - DAX 30: UP 1.3 percent at 11,802.85 (close)

Paris C 40: UP 1.7 percent at 5,435.48 (close)

Milan - FTSE MIB: UP 1.8 percent at 20,847.07 (close)

EURO STOXX 50: UP 1.3 percent at 3,391.66

Tokyo - Nikkei 225: DOWN 0.3 percent at 20,618.57 (close)

Hong Kong - Hang Seng: UP 0.2 percent at 26,270.04 (close)

Shanghai - Composite: FLAT at 2,880.33 (close)

Euro/dollar: DOWN at $1.1083 from $1.1100 at 2100 GMT

Pound/dollar: DOWN at $1.2121 from $1.2170

Euro/pound: UP at 91.42 pence from 91.21 pence

Dollar/yen: UP at 106.63 yen from 106.23 yen

Brent North Sea crude: UP 0.4% at $60.30 per barrel

West Texas Intermediate: DOWN 0.8% at $55.68 per barrel