Stocks rallied on Thursday, looking to recover some losses after the Fed’s higher-for-longer stance on interest rates drove markets lower over the past week.
The S&P 500 (^GSPC) rose about 0.6%, while the Dow Jones Industrial Average (^DJI) rose about 0.3%. The tech-heavy Nasdaq Composite (^IXIC) led the gains, rising 0.8%.
With the question of whether the Fed can nail a “soft landing” for the economy still a key debate, a fresh estimate for second quarter GDP came in unchanged at 2.1%. Also, official figures showed jobless claims last week rose slightly from the week prior to 204,000, compared with 215,000 expected. And data from the National Association of Realtors showed pending home sales for August plunged 7.1% down from a 0.9% monthly increase in July.
The Federal Reserve’s message that rates will remain higher for longer has rattled markets, though stocks are showing some resilience after several days of steep losses. In bonds, the rapid rise in the 10-year Treasury yield (^TNX) cooled off slightly, but still remained near 4.6%.
Both markets are under pressure from the surge in the price of oil, which hit fresh 2023 highs on Wednesday and is up over 35% since the end of June. That increase is seen as likely to drive up fuel prices, posing a challenge to the Fed’s efforts to cool inflation — and in turn to the chances of a rate cut.
Oil prices turned lower on Thursday, as West Texas Intermediate futures (CL=F) fell under $92 a barrel after topping $95 earlier in the morning. Brent crude futures (BZ=F) were lower around $95, having neared $97 in the session.
Friday brings the week’s data highlight, the reading on PCE inflation, the Fed’s preferred gauge. However, some believe it won’t be persistent price increases that prompt central bankers to act, but insatiable American shoppers and an economy that stays too hot.
In individual stocks, shares of Micron (MU) fell more than 4% after the chipmaker said its first quarter loss would be wider than previously forecast.
