U.S. stocks rose for third consecutive session as investors considered the prospects that the Federal Reserve would move ahead with easing monetary policy.
The S&P 500 (^GSPC) increased 0.61%, or 17.34 points, as of market close. The Dow (^DJI) advanced 0.71%, or 181.09 points, while the Nasdaq (^IXIC) rose 0.53%, or 40.08 points.
Market participants over the past several days heard public remarks from a parade of Fed officials, many of whom have suggested a near-term pivot toward easier monetary policy. Fed Chair Jerome Powell said in a speech Tuesday that the central bank would act “as appropriate to sustain the expansion,” and Fed Governor Lael Brainard told Yahoo Finance Wednesday that the Fed was “prepared to adjust policy” amid ongoing trade disputes and other economic risks.
As of Thursday afternoon, markets were pricing in a 17.5% probability of a rate cut by the Fed’s June meeting later this month, and a 97.2% probably of at least one rate cut by the end of 2019, according to CME Group.
A dovish tilt to monetary policy has swept global central banks. The European Central Bank on Thursday left its key refinancing and deposit rates at 0.00% and -0.4%, respectively, and the marginal lending facility rate was also left unchanged at 0.25%, as had all been expected. Notably, the central bank unexpectedly extended its forward guidance to say rates are now expected to “remain at their present levels at least through the first half of 2020.” The revision marks a six-month extension compared to the guidance the central bank provided in March.
“This is a trivial adjustment compared to market expectations, which have been pricing-out changes in rates through the end of 2021,” Claus Vistesen, chief eurozone economist for Pantheon Macroeconomics, wrote in an email. “That said, it is consistent with the idea that the ECB is, to some extent, being led by the market, which is an interesting proposition given recent price action.”
The euro jumped against the U.S. dollar to above $1.127 following the release of the ECB’s decision.
On the global trade front, negotiators from the U.S. and Mexico are poised to resume talks Thursday to try and reach a deal before President Donald Trump’s tariffs on Mexican imports are set to take effect next week. Trump wrote in a Twitter post Wednesday that “progress is being made” in this week’s talks, but “not nearly enough!” The Trump administration threatened to impose tariffs starting at 5% on all imports from Mexico in a move to try and pressure the country to try and stem the flow of migrants attempting to cross the border.
Elsewhere, investors are awaiting quarterly financial results from two high-profile companies that made their public debuts this year. Beyond Meat (BYND) and Zoom Video (ZM) are each set to report earnings after the bell Thursday. Shares of Beyond Meat are up about 300% from their IPO pricing, while shares of Zoom have more than doubled.
ECONOMY
U.S. new unemployment claims were unchanged at a seasonally adjusted 218,000 for the week ending June 1, matching the previous week’s upwardly revised level, according to the Department of Labor. This was slightly ahead of consensus expectations calling for 215,000 new jobless claims for the week. Continuing unemployment claims rose more-than-expected for the week ending May 25, totaling 1.682 million, versus 1.660 million expected. Continuing claims for the week prior were upwardly revised to 1.662 million.
The U.S. trade deficit for goods and services was $50.8 billion in April, the Census Bureau and Bureau of Economic Analysis reported Thursday. This was down from the upwardly revised $51.9 billion trade deficit in March, but slightly above the $50.7 billion level consensus economists anticipated for April. April exports fell by $4.6 billion compared to March, and imports decreased by $5.7 billion.