U.S. stocks ended higher Thursday as investors assessed the Federal Reserve’s decision a day earlier to hike interest rates and signal a series of further increases to come.
Signs of increasing escalation in the Russia-Ukraine war and worries over the progress of negotiations were also in focus, while Moscow said it made coupon payments on a pair of dollar-denominated sovereign bonds.
How did stock indexes trade?
- The Dow Jones Industrial Average DJIA, +1.23% rose 417.66 points, or 1.2%, to close at 34,480.76, extending its winning streak to four sessions.
- The S&P 500 SPX, +1.23% gained 53.81 points, or 1.2%, to finish at 4,411.67, for its third straight daily gain and the largest three day percentage gain since Thursday, November 5, 2020.
- The Nasdaq Composite COMP, +1.33% advanced 178.23 points, or 1.3%, ending at 13,614.78, for a three-day winning streak and the largest three day percentage gain since Thursday, November 5, 2020.
Stocks rallied sharply Wednesday following the Fed decision, with the Dow finishing more than 500 points, or 1.6%, higher, while the S&P 500 advanced 2.2%. The Nasdaq Composite Index jumped 3.8%, for its best one-day percentage rise since Nov. 4, 2020.
What drove the markets?
Stocks extended a recovery Thursday after volatile trading this week as investors fretted about whether the economy is heading for a combination of stagnating growth and persistently high inflation in the wake of the pandemic and the war in Ukraine.
Russia’s war in Ukraine will disrupt commerce and clog up supply chains, slashing economic growth and pushing prices sharply higher around the globe, the Organization for Economic Cooperation and Development warned Thursday.
The Federal Reserve on Wednesday afternoon delivered an as-expected quarter-percentage point interest-rate rise and laid out a path for several more increases to come this year but Fed Chairman Jerome Powell also said the U.S. economy was strong enough to cope with higher oil prices and vowed not to let inflation get entrenched in the economy.
Better-than-expected reports on the U.S. economy Thursday may also have helped stocks. First-time claims for unemployment benefits fell by 15,000 in the week ended March 12 to 214,000. U.S. housing starts rose 6.8% in February to an annual rate of 1.77 million, while the Philadelphia Fed’s regional factory index rose to 27.4 in March from 16 a month earlier. U.S. industrial production rose 0.5% in February.
“A wrath of positive US economic data vindicated Fed Chair Powell’s optimistic view of the economy,” said Edward Moya, Senior Market Analyst for the Americas at OANDA.
However, from a technical perspective, the market is “in a weak trend with little momentum and not a deep oversold condition,” said Jeff deGraaf, chairman of Renaissance Macro Research, in a note.
“We see this as an expectations game where positioning was slightly offsides, and the removal of an important unknown (the Fed) got people to jump,” he wrote, warning that the 4,550 level for the S&P 500 “will be difficult to get through.”
Reports that Russia had made $117 million coupon payments in dollars on a pair of dollar-denominated sovereign bonds helped lift sentiment too, analysts said. Failure to make payment in dollars would have put Moscow on track for a sovereign default after a 30-day grace period which means the Russia has avoided its first default on foreign debt since the 1917 Bolshevik Revolution, Moya noted.
Oil prices were also on the rise again Thursday, after three days of losses that had helped underpin equity markets. West Texas Intermediate crude CL00, +0.32% CL.1, +0.32% CLJ22, +0.32% jumped 8.4% to close at $102.98 a barrel. Energy stocks jumped as a result with Occidental Petroleum OXY, +9.47% up 9.5% after Berkshire Hathaway BRK.B, +2.64% revealed in a filing that it had upped its stake in the company.
While the war in Ukraine drags on with little progress in peace talks, the U.S. House of Representatives voted overwhelmingly to end regular trade relations with Russia in a move that would allow the U.S. to sharply raise tariffs on Russian goods entering the country.
President Joe Biden and his Chinese counterpart Xi Jinping are due to discuss the war later Friday. Biden is expected to tell Xi that the U.S. will impose costs if China backs Russia, Secretary of State Antony Blinken said.
Which companies were in focus?
- Shares of Dollar General Corp. DG, +4.45% rose 4.4% after providing an upbeat outlook for the coming fiscal year.
- Signet Jewelers Ltd. SIG, +6.97% reported fourth-quarter sales that beat expectations and raised its dividend. Shares saw a gain of 7%.
- Shares of Warby Parker Inc. WRBY, +3.28% ended 3.3% higher after the eyewear retailer reported a wider-than-expected fourth-quarter loss.
- Warren Buffett’s Berkshire Hathaway Inc. BRK.A, +2.86% BRKB, +2.26% boosted its common stock ownership position in Occidental Petroleum Corp. OXY, +9.47% to 136.37 million shares or 14.6% of the oil-and-gas company, according to a filing on Wednesday. Berkshire class A shares rose 2.9% after finishing Wednesday above $500,000 for the first time.
What did other assets do?
- The yield on the 10-year Treasury note TMUBMUSD10Y, 2.161% rose less than a basis point to 2.192%. Yields and debt prices move opposite each other.
- The ICE U.S. Dollar Index DXY, +0.02%, a measure of the currency against a basket of six major rivals, dropped 0.6%.
- Gold futures GC00, +0.01% snapped a four-day losing streak, rising 1.7%, to close at $1,940.90 an ounce.
- Bitcoin BTCUSD, +0.56% was down 0.6% to trade below $41,000.
- The Stoxx Europe 600 SXXP, +0.45% rose 0.5%, while London’s FTSE 100 UKX, +1.28% gained 1.3%.
- Hong Kong’s Hang Seng Index HSI, +7.04% jumped 7%, while the Shanghai Composite SHCOMP, +1.40% rose 1.4% and Japan’s Nikkei 225 NIK, +3.46% advanced 3.5%.