Wall Street was mixed on retail sales data

The two-year Treasury yield, which is trending in line with expectations for the Fed, briefly surged towards 4.70 percent after the retail sales report, from less than 4.60 percent overnight and from 4.62 percent late Tuesday. It then fell back to 4.66 percent, still near its highest level since November.

The 10-year yield, which helps set interest rates on mortgages and other major loans, rose to 3.79 percent from 3.75 percent late Tuesday.

After slightly higher-than-expected inflation data on Tuesday, economists at Deutsche Bank have raised their forecast of how much the Fed will raise its key overnight interest rate. They now see a final rise to 5.6 percent from their previous forecast of 5.1 percent.

The Fed has already raised its federal funds rate to a range of 4.50 percent to 4.75 percent, from practically zero a year ago.

Deutsche Bank economists said they still expect a recession, but that near-term strength in the economy could push its timing to the final three months of the year, later than they originally thought.

Many other traders have also raised their forecasts of how high the Fed will eventually charge rates. They’ve also sharply reduced bets on the Fed cutting rates later this year.

Still, despite recent swings, stocks are holding on to healthy gains for the year. The S&P 500 is up 7.4 percent as strong data reports raise hopes the economy can avoid a recession. Or, if you hit, it might just be a short and flat one.

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The next big milestone for the market is likely to be the Fed’s late March meeting, where policymakers will make their latest forecasts for year-end interest rates, Hainlin said. That could mean choppy trading in the markets until then as investors try to guess which way things are headed.

On Wall Street, Airbnb’s shares rose 12.8 percent on Wednesday after reporting stronger earnings and revenue than analysts had expected for the most recent quarter. It also said trends remain encouraging into the new year and it gave a sales forecast that beat Wall Street’s.

On the loser side were energy producer stocks, which fell with the price of oil. Energy stocks in the S&P 500 fell 2.3 percent, by far the worst performer of the 11 sectors that make up the index.

One of the sharpest declines in the S&P 500 came from Devon Energy, which fell 11.1 percent after reporting weaker-than-expected earnings for the most recent quarter.

This earnings season has been muted as many companies reported their earnings are being squeezed by high costs and interest rates.

In equity markets overseas, Turkey’s market rose nearly 10 percent after trading reopened after a shutdown caused by the region’s devastating earthquake.

European stocks were slightly higher, the German DAX achieved a return of 0.8 percent. Asian stocks were weaker, with Hong Kong’s Hang Seng down 1.4 percent and South Korea’s Kospi down 1.5 percent.