By Gunjan Banerji and Avantika Chilkoti 

U.S. stocks surged Wednesday after strong earnings reports from retailers eased some fears about slowing economic growth.

The Dow Jones Industrial Average climbed 1.1%, and the S&P 500 jumped 0.9%. The Nasdaq Composite advanced 1%.

Bond and equity markets have been gloomy about global growth in recent weeks, with many investors expecting a cycle of monetary easing from leading central banks. Some of the anxieties surrounding growth were tempered Wednesday after retailers revealed their financial results for the last quarter.

Target shares soared 19%, on track for a new high, as it reported that sales and profit rose in the second quarter and the retailer raised its earnings guidance for the year. Lowe's also reported higher profits that beat analysts' estimates, pushing shares up 9.9%. The consumer discretionary and tech sectors within the S&P 500 were the biggest winners.

"There has been this very big imminent recession narrative that's taken hold of the market," said R.J. Grant, director of equity trading at KBW. The latest earnings show "that the consumer is a lot healthier than people think."

Investors were also awaiting signs that the U.S. Federal Reserve might cut rates further when the central bank publishes minutes from its July meeting later in the day.

On Friday, Federal Reserve Chairman Jerome Powell speaks in Jackson Hole, Wyo., at the Fed's annual economic policy symposium. Several investors warned that markets could grow more turbulent as investors analyzed these comments. The Fed has been a primary driver for markets in recent weeks.

Investors sold traditionally safer assets like Treasurys ahead of the minutes release, sending the yield on the 10-year to 1.561% Wednesday, according to Tradeweb, from 1.557% on Tuesday.

"Right now we're kind of experiencing the calm before the storm," said Bryce Doty, senior portfolio manager at Sit Investment Associates, cautioning that markets could grow rocky.

The stakes are high for comments from the Fed this week. Analysts will be watching closely for insights into the debate surrounding last month's rate cut, as many, including Leslie Sita, portfolio manager in Lombard Odier IM's fundamental fixed income team, flagged concerns around the president's criticism of Fed Chairman Jerome Powell.

" Trump has made it clear he didn't like Powell's policy," she said, adding that strategists at Lombard Odier are forecasting a cut of 50 basis points at the next meeting. "Even if Powell was wanting to mention that he's independent in the way he does things, obviously the pressure was there."

President Trump said he was weighing measures to boost the world's largest economy, potentially giving stocks a lift too, analysts said.

Investors also welcomed possible political changes in Italy. The Stoxx Europe 600 climbed 1.2%, a day after the country's prime minister resigned.

"Risk appetite has been buoyed by speculation that Italy will avoid a snap election," said Richard McGuire, head of rates strategy at Rabobank.

The yield on Italian government debt reached its lowest level in around three years Wednesday, continuing to drop after Prime Minister Giuseppe Conte resigned Tuesday, triggering a power struggle within the government in Rome at a time when growth is faltering.

Italy's benchmark FTSE MIB equities index outperformed other indexes in the region.

In commodities, the price of Brent crude climbed 0.8% to $60.53 a barrel as tensions in the Strait of Hormuz threatened global supplies while analysts worried global trade concerns could cap demand for oil in the coming months.

Australia announced plans to join a U.S.-led coalition protecting oil tankers and cargo ships from attacks by Iran in the region on Wednesday, as pressure on Tehran increased.

--Jessica Menton contributed to this article.

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com and Avantika Chilkoti at Avantika.Chilkoti@wsj.com

(END) Dow Jones Newswires

August 21, 2019 13:30 ET (17:30 GMT)

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