U.S. stocks logged small gains in a choppy session Thursday as bond yields halted their slide, giving the market a reprieve from selling sparked by continued U.S.-China trade tensions and worries about global economic growth.
How did the major benchmarks fare?
The Dow Jones Industrial Average DJIA, +0.17% rose 43.47 points, or 0.2%, to close at 25,169.88. The S&P 500 index SPX, +0.21% gained 5.84 points, or 0.2%, to 2,788.86 and the Nasdaq Composite Index COMP, +0.27% climbed 20.41 points, or 0.3%, to 7,567.72.
What drove the market?
Treasury prices retreated with yields edging back up. The yield on the 10-year note TMUBMUSD10Y, -2.20% rose 3 basis points to 2.266%.
A recent rally in government bonds deepened the inversion of the yield curve, with the rate on the 10-year note sinking further below the yield on the 3-month T-bill TMUBMUSD03M, -0.45% stoking recession fears. Yields move in the opposite direction of bond prices.
The bounce in stocks came despite a lack of apparent progress on the U.S.-China tariff dispute. Speaking to reporters in Beijing, Chinese Vice Foreign Minister Zhang Hanhui said Beijing opposes economic friction but is “not afraid of a trade war,” according to news reports. “This kind of deliberately provoking trade disputes is naked economic terrorism, economic chauvinism, economic bullying,” Zhang said.
Investors will get an update overnight on the impact of Sino-American trade tensions on the Chinese economy when China’s Federation of Logistics and Purchasing issues its purchasing manager’s index for May. Initial readings of available indicators suggest that the index will show the Chinese manufacturing sector falling into contraction, which could further deepen fears over global growth.
Federal Reserve Vice Chairman Richard Clarida said the U.S. economy was “in a very good place.” But if inflation remains below the 2% target or “that global economic and financial developments present a material downside risk to our baseline outlook, then these are developments that the Committee would take into account in assessing the appropriate stance for monetary policy,” he said in a speech to the Economic Club of New York.
What economic data were in focus?
The Commerce Department lowered its initial estimate of first-quarter gross domestic product growth to 3.1%, compared with the previous reading of 3.2% and average economists’ estimates for a 3% second read.
The government also issued an estimate of the trade deficit in April, which came in at $72.1 billion, versus the $71.4 billion gap in March, and below the $72.9 billion expected by economists, per a MarketWatch poll.
New applications for jobless benefits rose to 215,000 in the week ended May 25, in line with economists expectations and above the 212,000 seen the week prior.
Pending home sales fell 1.5% in April from March, and were 2% lower than a year ago, the National Association of Realtors reported. Economists were expecting 0.5% increase, according to Econoday.
What were analysts saying?
“The U.S.-China trade war continues to deepen with China ending purchases of U.S. soybeans. U.S. first quarter GDP slipped slightly to 3.1% as had been widely expected, but core personal consumption was revised down to 1.0%, below the 1.3% street estimates,” said Colin Cieszynski, chief market strategist at SIA Wealth Management, in a note.
Cieszynski noted, however, that the silver lining is that “there’s no pressure on the Fed to raise rates any time soon, perhaps not at all this year.”
What stocks were in focus?
Shares of Dollar General Corp. DG, +7.16% surged 7.2% after the discount retailer reported that first-quarter same-store sales grew by 3.8%, versus the 2.8% expected by analysts, according to FactSet. Rival Dollar Tree Inc. DLTR, +3.14% also reported better-than-expected first quarter earnings, and its stock rose 3.1%.
Palo Alto Networks Inc. PANW, -5.12% shares skidded 5.1% after the cybersecurity company reported first quarter earnings that beat expectations but then said that a series of acquisitions would suppress earnings in the second quarter.
Express Inc. EXPR, +0.95% shares gained 1% after the apparel retailer reported a first quarter loss even though it was much narrower than expected by analysts.
Shares of Dow component Verizon Communications Inc. VZ, -2.32% fell 2.3% after UBS analyst John Hodulik lowered his rating on the stock to neutral from buy.
How were other markets trading?
Stocks in Asia succumbed to another round of selling with Japan’s Nikkei 225 NIK, -1.63% falling 0.3%, Hong Kong’s Hang Seng Index HSI, -0.83% down 0.4% and China’s Shanghai Composite Index SHCOMP, -0.24% losing 0.3%. In Europe, shares were edging higher, with the Stoxx Europe 600 SXXP, -0.78% adding 0.4%.
In commodities markets, oil prices CLN19, -0.94% skidded nearly 4%, gold prices GCN19, +0.53% settled higher and the U.S. dollar DXY, -0.15% was virtually unchanged.