U.S. stocks barreled higher on Thursday, led by consumer and tech stocks, after a batch of mostly benign economic data helped assuage investor concerns of a consumer pullback that could harm the economy.
Federal Reserve minutes released Wednesday also stoked speculation about a pause to reassess interest rate hikes later in the year.
How are stocks trading?
- The Dow Jones Industrial Average DJIA, +1.62% rose 530 points, or 1.7%, to 32,650 as the average headed for its fifth straight daily gain.
- S&P 500 SPX, +1.88% rose 77 points, or 1.9%, to 4,055, holding above the key 4,000 level
- Nasdaq Composite COMP, +2.43% was up 291 points, or 2.6% at 11,725.
Should it finish higher on Thursday, the Dow would record its longest winning streak since March.
What’s driving the markets?
U.S. stock indexes shot higher, set to build on Wednesday’s gains, as minutes from the Fed’s latest meeting signaled that the central bank will monitor economic data for signs of weakness as it looks to head off high inflation.
While Fed officials still looked poised to pull the trigger on planned 50 basis-point hikes in June and July, as policy moves “expeditiously” toward the projected neutral rate of interest, they also appear focused on avoiding a hard landing for the economy.
“Heading into the holiday weekend, it’s a nice reprieve to see things in the green,” said Northern Trust Wealth Management’s Kei Sasaki, a senior portfolio manager, by phone. “We think the markets, as well as investor sentiment, maybe had a bit of a sigh of relief,” Sasaki said, of the Fed minutes.
A view has emerged that after interest rate hikes this summer, the Fed could have more wiggle room to reassess its planned rate rises this year, particularly if economic growth shows signs of sputtering or the labor market starts to falter.
“This coincides with some of the things that have been facing investors, including anxiety as some retailers report lackluster results,” Sasaki said, adding that if consumer spending is slowing down, “that’s when recessionary fears kick in.”
As summer begins and the latest corporate earnings season draws to a close, there will be fewer negative catalysts to rattle markets.
“There’s a lack of scheduled negative news, although something negative could also come out of the blue,” said Mohannad Aama, a longtime markets strategist and professor at Rutgers University.
One potential risk on the horizon is Costco COST, +5.18%, which is expected to report earnings after the close on Thursday. Recent reports from rival retailers like Target TGT, +3.52% and Walmart WMT, +2.01% rattled markets earlier this month.
However, investors did see some strong news from retailers earlier as Dollar Tree DLTR, +20.71%, Dollar General DG, +13.82% and Macy’s M, +17.78% rocketed higher — their shares climbing about 21%, 14% and 18% respectively — breaking a trend of softening guidance among prominent retailers.
Despite economic data released earlier in the week that suggests the economy is slowing, “beaten up retail shares are finding investor interest,” said Quincy Krosby, chief equity strategist at LPL Financial, in emailed comments.
Furthermore, the “notion that the consumer, 70 percent of the U.S. economy, is on a spending strike, is overblown as earnings reports coupled with positive guidance indicate otherwise,” Krosby said.
In fresh U.S. economic data, new U.S. jobless claims fell by 8,000 last week to 210,000, signaling that layoffs remain extremely low and the economy is still expanding despite more headwinds. The latest reading on U.S. first-quarter GDP showed the economy contracted 1.5% in the first quarter, which was slightly more than the 1.4% contraction reported during the first reading — although the change wasn’t large enough to induce panic.
What companies are in focus?
- Shares of Broadcom Inc. AVGO, +3.00% were up 3.7% after a $61 billion deal for cloud company VMware Inc. VMW, +3.15% emerged, though speculation has been circulating the market for a few days. VMware shares rose about 3%.
- Twitter Inc. TWTR, +5.44% shares gained 7% after Tesla TSLA, +6.65% CEO Elon Musk said in a regulatory filing that he would lean on equity to finance his $44 billion Twitter deal, and not a margin loan backed by shares of his electric-car maker.
- Shares of Apple Inc. AAPL, +1.94% turned 2.3% higher, erasing losses from the premarket session, after a report said the iPhone maker plans to keep production of its flagship item flat this year due to industry challenges. Apple also said it would lift hourly pay for U.S. workers to $22 an hour, up 45% from 2018, to compete in a tight labor market and amid pushes by some employees to unionize.
- Nvidia Corp. NVDA, +4.92% shares rose 5.9%, recovering from early losses following the release of a softer outlook.
- Other tech companies shares slumped. Snowflake Inc. SNOW, -5.03% shares were off 3.7% after the software company gave a disappointing forecast and reported cautious consumer activity.
- Cloud computing company Nutanix Inc NTNX, -25.09% tumbled 24.1% after its poor fourth-quarter outlook.
How are other assets trading?
- The yield on the 10-year Treasury note TMUBMUSD10Y, 2.749% was flat at 2.75%. Yields and Treasury prices move opposite each other.
- The ICE Dollar Index DXY, -0.26%, which measures the greenback against major currencies, was down 0.2%.
- In oil futures CL00, +3.38%, West Texas Intermediate crude for July delivery CLN22, +3.38% gained 3.3% to $113.9 a barrel. Gold GC00, +0.28% for June delivery closed up 0.1% at $1,847.60 an ounce.
- Bitcoin BTCUSD, -1.29% was off 0.3% to $29,450.
- In European equities, the Stoxx Europe 600 SXXP, +0.78% closed up 0.8%, while London’s FTSE 100 UKX, +0.56% gained 0.6%.
- In Asia, the Shanghai Composite SHCOMP, +0.50% finished 0.5% higher, while Hong Kong’s Hang Seng Index HSI, -0.27% fell 0.2% and Japan’s Nikkei 225 index NIK, -0.27% dropped 0.2%.
—Barbara Kollmeyer contributed reporting