NEW YORK, Dec 22 — Wall Street’s main stock indexes rallied on Wednesday and wereon track for their best day this month,boosted by Nike, while improving consumer sentiment and easing inflation expectations comforted investors.

Nike Inc NKE.N jumped 13.7 per cent after beating profit expectationsfor its second quarter on strong holiday demand from North American shoppers, while Carnival Corp CCL.N soared 5.4 per cent after posting a smaller-than-expected quarterly loss.

Gains in the sportswear maker and the cruise operator pushed consumer discretionary shares .SPLRCD to the top of the major S&P 500 .SPX sector indexes, while financials .SPSY also roseover 1 per cent.

FedEx Corp FDX.N, which sparked a market selloff in September after pulling financial forecasts, gained 4.4 per cent on the delivery company’s plans to slash an additional US$1 billion (RM4.4 billion) in costs.

"Most people think we are heading toward a recession, but when earnings like Nike and FedEx are strong, then all of a sudden that could pave the way for higher (stock) prices next year,” said Adam Sarhan, chief executive at 50 Park Investments, New York.

US consumer confidence rebounded in December as inflation retreated and the labor market remained strong, while 12-month inflation expectations fell to 6.7 per cent, the lowest since September last year.

"Consumers are getting a little bit of confidence in falling gas and food prices; they are also seeing these deflationary trends starting to form, which is really helping them this holiday season,” said Brian Klimke, investment director at Cetera Investment Management LLC.

On the other hand, US existing home sales slumped 7.7 per cent to a 2-1/2-year low in November as the housing market remains plagued by higher mortgage rates.

Fears of a recession following the US central bank’s prolonged interest rate hikes have weighed heavily on equities since its policy meeting last week, despite signs of cooling inflation.

However, the benchmark S&P 500 and Dow Jones Industrial Average .DJI were on track for their first quarterly gains this year, rising 8 per cent and 16 per cent, respectively, on the back of upbeat earnings, easing price pressures and hopes that the Federal Reserve will slow its rate hikes.

At 12:05 p.m. ET, the Dow Jones Industrial Average .DJI was up 490.31 points, or 1.49 per cent, at 33,340.05, the S&P 500 .SPX was up 53.08 points, or 1.39 per cent, at 3,874.70, and the Nasdaq Composite .IXIC was up 154.77 points, or 1.47 per cent, at 10,701.88.

Energy firms .SPNY also gained tracking higher oil prices after data showed a larger-than-expected draw in US crude stockpiles. O/R

Among single stocks, AMC Entertainment Holdings Inc AMC.N jumped 4.6 per cent after the theater-chain operator said it suspended talks to acquire certain assets of bankrupt Cineworld Group CINE.L.

Market volumes are expected to decline this week before the Christmas and New Year holidays amid low participation.

Advancing issues outnumbered decliners by a 4.77-to-1 ratio on the NYSE and 3.04-to-1 ratio on the Nasdaq.

The S&P index recorded five new 52-week highs and three new lows, while the Nasdaq recorded 42 new highs and 171 new lows. — Reuters