By U.S. stocks clawed back earlier losses to end higher Thursday, limiting declines to two days, as investors digested the Federal Reserve’s monetary tightening plans, while yields on longer dated Treasuries rose.
What happened
The Dow Jones Industrial Average
DJIA,
+0.25%
rose 87.06 points, or 0.3%, to close at 34,583.57.
The S&P 500
SPX,
+0.43%
gained 19.05 points, or 0.4%, finishing at 4,500.21.
The Nasdaq Composite
COMP,
+0.06%
rose 8.48 points, or 0.1%, ending at 13,897.30.
On Wednesday, the Dow fell 145 points, or 0.4%, while the S&P 500 lost 1% and the Nasdaq Composite dropped 2.2%. The S&P 500 closed below its 200-day average and is down 6% on the year.
What drove markets
Stock indexes staged a comeback Thursday afternoon as investors digested minutes from the March Federal Open Market Committee meeting, released Wednesday, showing the central bank weighing a plan to reduce its bond holdings by $95 billion per month as it tries to stamp out surging inflation.
“I think it’s largely a psychological market reaction today,” said John Carey, director of equity income at Amundi US, of the afternoon turnaround.
“One the one hand, the more aggressive Federal Reserve stance on interest rates would seem to be a potential problem for stocks,” he said by phone. “Although, the aggressiveness also indicates the Fed’s seriousness about tackling inflation.”
“Maybe if the Fed is more aggressive and tackles inflation, then we might not need to have high interest rates,” he said.
Rates analysts at Bank of America said the 10-year yield
TMUBMUSD10Y,
2.662%
could reach 3%, even though they see fair value in the 2.05% to 2.7% range. The yield was back on the rise Thursday at 2.654%, its highest yield since March 6, 2019, according to Dow Jones Market Data.
“Right now, the market is going through a bit of turbulence,” said Peter Cardillo, chief market strategist at Spartan Capital Securities, by phone.
“Even though the market doesn’t like the tough talk, it is important because the Fed is behind the yield curve. So they need to basically make sure inflation doesn’t get out of hand.”
St. Louis Fed President James Bullard on Thursday dismissed talk of recession, saying that the U.S. expansion “is not ‘old’ and can continue for a long time.” Bullard has called for the Fed to raise interest rates swiftly to counter inflation, saying he wants to get the Fed’s benchmark interest rate above 3% this year.
Investors next will be waiting on updates on inflation, including next week’s U.S. consumer-price index report for March, but also from companies as the quarterly earnings reporting season kicks off in earnest.
“We will be looking for any signs that consumer demand is decreasing as a result of higher prices,” Carey said, but also for “any effects on the housing market with higher rates.”
In economic data, the U.S. Labor Department said first-time jobless claims dropped by 5,000 to 166,000 in week ended April 12, the lowest since 1968.
Which companies were in focus?
Shares of HP Inc.
HPQ,
+14.75%
jumped 14.8% after Warren Buffett’s Berkshire Hathaway Inc.
BRK.A,
+0.53%
BRKB,
+0.62%
disclosed that it had taken an 11% stake in the maker of personal computers.
After an extension of the federal student loan moratorium, SoFi Technologies Inc.
SOFI,
-7.20%
trimmed its outlook for the full fiscal year Wednesday, with executives now assuming the moratorium lasts at least through the rest of the year. Shares lost 7.2%.
Shares of Levi Strauss & Co.
LEVI,
-0.72%
fell 0.7% after the retailer late Wednesday reported quarterly earnings and sales that topped Wall Street forecasts.
Shares of ConAgra Brands Inc.
CAG,
+0.26%
gained 0.3% after the food company delivered disappointing guidance.
Rite Aid Corp.
RAD,
-17.18%
shares plunged 17.2% after Deutsche Bank analyst George Hill cut his rating on the stock to sell from hold, slashing his price target to $1 from $16.
How other assets performed
The ICE U.S. Dollar Index
DXY,
+0.18%
rose 0.2%.
Bitcoin
BTCUSD,
-0.69%
was off 0.8% at $43,425.
Oil futures gave up early gains, with the U.S. benchmark
CL.1,
+0.69%
settling 1.3% lower at $101.96 a barrel, while gold futures
GC00,
+0.55%
rose 0.8% ending at $1,937.80 an ounce.
The Stoxx Europe 600
SXXP,
-0.21%
settled down 0.2%, while London’s FTSE 100
UKX,
-0.47%
lost 0.5%.
Stocks fell in Asia, with the Shanghai Composite
SHCOMP,
-1.42%
ending 1.4% lower, while the Hang Seng Index
HSI,
-1.23%
lost 1.2% in Hong Kong and Japan’s Nikkei 225
NIK,
-1.69%
declined 1.7%.
—Steven Goldstein contributed reporting
