U.S. stocks closed higher Thursday, snapping a 3-session skid, after improving labor market data offset worrisome inflation data, which a day prior sent the Dow Jones Industrial Average to its biggest one-day loss since January.
How did stocks perform?
The Dow Jones Industrial Average
rose 434.79 points, or 1.3%, to close at 34,021.45, its biggest one-day percent rise in almost two months.
The S&P 500
gained 49.46 points, or 1.2%, to end at 4,112.50.
The Nasdaq Composite
advanced 93.31 points, or 0.7%, finishing at 13,124.99
The Russell 2000
of small-caps rose 35.81 points, or 1.7%, ending at 2,170.95
On Wednesday, stocks tumbled sharply after a round of much stronger-than-expected April inflation data, with the Dow
dropping 681.50 points, or 2%, for its biggest one-day drop since January. The S&P 500
fell 2.1% and the Nasdaq Composite
What drove the market?
Investors focused on U.S. weekly data on jobless claims, with applications for first-time benefits falling to a pandemic low of 473,000 in the week ended May 8 and took another round of U.S. inflation data in stride on Thursday, with stocks rising after April producer-price index jumped 0.6%, far above forecasts for a 0.3% rise. Year over year, wholesale inflation rose 6.2% versus a 4.2% rise in March.
“We are getting a nice little rebound,” said Kent Engelke, chief economic strategist at Capitol Securities Management, adding that if inflation runs at 3% to 4% annually, it should be a positive for Main Street America. “It may not be great for high-growth technology issues, but it is great for companies that produce things.”
“I think this is a reawakening of Main Street,” Engelke said. “That’s very evident today when you look at value versus growth.”
Concerns about inflation moved to front and center for investors this week after data showed prices at the consumer level rose by most in a month since 2009 and posted the largest year-over-year increase since 2008.
That briefly sent investors scrambling to unload stocks and other risky assets, even though they had been bracing for a run of hot inflation data for months, said Keith Buchanan, portfolio manager at GLOBALT Investments, an Atlanta-based investment adviser with $2.4 billion in assets under management.
“As easy as it was to prognosticate that inflation would run hot, once we saw the data coming in it still caused a reaction that in six to nine months will probably look like an overreaction,” he said.
A rise in commodity prices, labor shortages, and the consumer prices data this week have boosted concerns that the U.S. Federal Reserve might consider withdrawing its pandemic crisis support despite its reassurances that the rise in inflation is expected to be transitory.
“The jury is still out,” said Randy Frederick, vice president of trading and derivatives for the Schwab Center for Financial Research, about whether Thursday’s push higher has staying power. “It is kind of like the market doesn’t know how to interpret recent economic data,” he said, adding that stocks could continue to be choppy through the summer as the recovery progresses and more people step away for vacations. “There aren’t a lot of upside catalysts in the hopper for the next couple of months.”
Thursday’s upbeat tone helped stocks pare weekly losses, leaving the S&P 500 index 2.8% off its record closing high last Friday, while the tech-heavy Nasdaq fell to about 7.2% below its April 29 record.
Crypto assets also were in focus Thursday, with bitcoin
and other digital assets down sharply. The fall came after Tesla Inc. TSLA Chief Executive Elon Musk tweeted late Wednesday that the electric car maker would no longer accept bitcoin for payment due to environmental concerns around crypto mining.
Elsewhere, the price of oil dropped off sharply as energy traders digested news that the Colonial Pipeline had resumed operations after shutting down late last week in response to a ransomware attack.
Which companies were in focus?
received approval from U.S. air-safety regulators to make fixes to an electrical problem that has grounded more than 100 of its 737 MAX jets, the company and a Federal Aviation Administration official said, paving the way for airlines to return them to passenger service within days, according to The Wall Street Journal. Shares of the Dow component rose 0.8%.
Shares of Sonos Inc.
rose 7.4% after the maker of smart speakers late Tuesday reported a surprise profit.
Dating-app company Bumble Inc.
late Wednesday reported first-quarter user and revenue growth and profit that topped expectations. Shares fell 14.3%.
Shares of Coupang Inc.
fell 9.3% after the South Korean e-commerce company reported its first quarterly results as a publicly traded company.
Alibaba Group Holding Ltd.
swung to a loss for its March quarter as the company faced an antimonopoly fine, but the Chinese e-commerce giant beat revenue expectations thanks to continued momentum for its online marketplaces. Shares shed 6.3%.
shares soared on retail investor sentiment of a short squeeze and a completed at-the-market equity offering brought in $438 million of fresh capital to the beleaguered theater chain. Shares rose 23.7%.
What did other markets do?
The yield on the 10-year Treasury note
fell 3.3 basis points to 1.666%. Yields and bond prices move in opposite directions.
The ICE U.S. Dollar Index
a measure of the U.S. currency against a basket of six major rivals, was up flat.
Oil futures fell sharply, with the U.S. benchmark
closing down 3.5% to settle at $63.82 a barrel. Gold futures
closed higher, up 0.1% to settle at $1,824 an ounce.
European equities closed lower in choppy trade, with the Stoxx 600
down 0.1% and London’s FTSE 100
In Asia, Hong Kong’s Hang Seng Index
fell 1.8%, the Shanghai Composite
declined 1% and Japan’s Nikkei 225
Additional reporting by Thornton McEnery