US stocks closed higher Thursday and skid 3 sessions after the improvement in labor data offset worrying inflation data that had led the Dow Jones Industrial Average to its biggest one-day loss since January the day before.
How did the stocks perform?
The Dow Jones Industrial Average DJIA (+ 1.06%) rose 434.79 points, or 1.3%, to close at 34,021.45, the largest one-day percentage increase in nearly two months.
The S&P 500 SPX (+ 1.49%) gained 49.46 points, or 1.2%, to finish at 4,112.50.
The Nasdaq Composite COMP (+ 2.32%) gained 93.31 points or 0.7% and ended at 13,124.99
The Russell 2000 RUT, + 2.47% of small caps, rose 35.81 points, or 1.7%, to finish at 2,170.95
On Wednesday, stocks fell sharply after a round of much stronger than expected April inflation data. The Dow DJIA fell + 1.06% to 681.50 points, or 2%, the largest one-day decline since January. The S&P 500 SPX (+ 1.49%) fell 2.1% and the Nasdaq Composite COMP (+ 2.32%) fell 2.7%.
Read: What does inflation mean for the stock market? It’s supposed to be positive – but investors are now scared
What drove the market?
Investors focused on the weekly US unemployment claims data. In the week ending May 8, first-time benefits claims fell to a pandemic low of 473,000 and accepted another round of US inflation data on Thursday, with stocks rising after the producer in April. The price index rose by 0.6% and was thus far above the forecast for an increase of 0.3%. Wholesale inflation rose 6.2% year over year from 4.2% in March.
“We’re getting a nice little break,” said Kent Engelke, chief economic strategist at Capitol Securities Management, adding that an annual inflation rate of 3% to 4% should be positive for Main Street America. “It might not be great for high-growth technology problems, but it is great for companies that make things.”
“I think this is a Main Street reawakening,” Engelke said. “It’s very obvious today when you look at value versus growth.”
Inflation worries came to the fore this week after data showed that consumer prices rose the most in a month since 2009, and saw the largest year-over-year increase since 2008.
This caused investors to briefly discharge stocks and other risky assets despite having been expecting a series of hot inflation data for months, said Keith Buchanan, portfolio manager at GLOBALT Investments, an Atlanta-based investment advisor with assets of 2.4 Billion USD under management.
“As easy as it was to predict inflation would get hot when we saw the incoming data still provoked a response that will likely look like an overreaction in six to nine months,” he said.
A surge in commodity prices, labor shortages and consumer price data this week has heightened concerns that the US Federal Reserve may consider withdrawing support for the pandemic crisis amid assurances that the rise in inflation is likely to be temporary.
“The jury is still vacant,” said Randy Frederick, Vice President for Trade and Derivatives of the Schwab Center for Financial Research, about whether the increase is sustained on Thursday. “It’s like the market doesn’t know how to interpret the latest economic data,” he said, adding that stocks could remain choppy through the summer as the rebound continues and more people go on vacation. “There aren’t many upward catalysts in the funnel for the next few months.”
Thursday’s positive tone helped stocks reduce weekly losses and left the S&P 500 index 2.8% off its record high last Friday, while the tech-heavy Nasdaq fell about 7.2% below its record fell on April 29th.
Crypto assets were also in focus on Thursday, with Bitcoin BTCUSD, + 0.64% and other digital assets falling sharply. The case came after that Tesla Inc. TSLA chief executive Elon Musk tweeted late Wednesday that the electric car maker would no longer accept bitcoin as a form of payment due to environmental concerns related to crypto mining.
See: Bitcoin bulls on social media reject Musk’s argument to stop crypto-based auto sales
Elsewhere, oil prices fell sharply as energy traders digested the news that the Colonial Pipeline had resumed operations after it shut down in response to a ransomware attack late last week.
Which companies were in focus?
BA, + 2.62% received US aviation safety clearance to fix an electrical issue that grounded more than 100 of its 737 MAX jets. This was announced by the company and an official from the Federal Aviation Administration and paved the way for airlines to return them to passenger service within a few days, according to the Wall Street Journal. The Dow component stocks rose 0.8%.
Shares of Sonos Inc.
SONO, + 0.15%, rose 7.4% after the smart speaker maker reported a surprise gain late Tuesday.
Dating app company Bumble Inc.
BMBL, + 5.78% late Wednesday, reported user and revenue growth and earnings that exceeded expectations for the first quarter. Stocks fell 14.3%.
Shares of Coupang Inc.
CPNG, + 13.70%, fell 9.3% after the South Korean e-commerce company reported its first quarter results as a publicly traded company.
Alibaba Group Holding Ltd.
BABA, + 1.66%, posted a loss in March as the company faced an antimonopoly fine. However, the Chinese e-commerce giant exceeded sales expectations thanks to the continued momentum of its online marketplaces. Stocks lose 6.3%.
AMC, + 1.64% shares, rose on sentiment among retail investors from a brief press and a completed stock offering in the market that raised $ 438 million in new capital to the beleaguered theater chain. The shares rose 23.7%.
What have other markets done?
The yield on the 10 year Treasury note TMUBMUSD10Y, 1.625%, fell 3.3 basis points to 1.666%. Yields and bond prices are moving in opposite directions.
The ICE US Dollar Index DXY, -0.49%,
A measure for the US currency against a basket of six major competitors was unchanged.
Oil futures fell sharply, with the US benchmark CL00 closing + 2.65% and closing 3.5% to settle at $ 63.82 a barrel. GC00 gold futures, + 1.09%, closed higher, rising 0.1% to settle at $ 1,824 an ounce.
European stocks closed lower in troubled trading, with the Stoxx 600 SXXP falling + 1.19% 0.1% and the London-based FTSE 100 UKX + 1.15% down 0.6%.
In Asia, Hong Kong’s Hang Seng Index HSI (+ 1.11%) fell 1.8%, the Shanghai Composite SHCOMP (+ 1.77%) fell 1% and the Japanese Nikkei 225 NIK (+ 2.32%) fell 2% , 5%.
Additional coverage from Thornton McEnery