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U.S. stocks on Thursday ended higher, as gains in heavyweight growth sectors helped offset losses in financials a day ahead of major earnings from big banks.
Sentiment also received a boost after a cooler-than-expected producer inflation print.
The tech-heavy Nasdaq Composite (COMP:IND) added 1.68% to close at 16,442.20 points, while the benchmark S&P 500 (SP500) climbed 0.74% to settle at 5,198.98 points. The blue-chip Dow (DJI) concluded little changed at 38,459.08 points.
Of the 11 S&P sectors, six ended in the red. Technology, Communication Services and Consumer Discretionary topped the gainers. Financials fell the most as investors geared up for quarterly reports from JPMorgan (JPM), Wells Fargo (WFC) and Citi (C) on Friday. With interest rates having stayed at record levels, the major lenders are expected to do well.
Earlier, Wall Street’s major averages opened in the green after the latest producer price index (PPI) report. Before the opening bell, the U.S. Bureau of Labor Statistics said headline PPI rose 0.2% M/M in March, lower than the expected rise of 0.3% and decelerating from February’s high reading of +0.6%. Meanwhile, core PPI also climbed 0.2% M/M, matching consensus and slowing from the prior month’s 0.3% increase.
The cooler-than-expected PPI data brought some relief to market participants a day after yet another hot consumer price index (CPI) report led to heavy selling on Wall Street and the dialing back of interest rate cut expectations.
Also on Thursday’s economic calendar, the number of Americans filing for initial jobless claims in the past week fell to 211K versus an estimate of 216K.
“Today was a surprisingly strong rebound day. While I cannot make the case that the weaker PPI print was bearish, I’m still not over yesterday’s hot CPI number. Four consecutive higher-than-expected CPI prints, fueled by energy and core services, do not bode well for the economy, as the Fed will likely have to keep rates higher for longer,” Leo Nelissen, part of investing group iREIT on Alpha, told Seeking Alpha.
“With the market trading at 21x forward earnings (a multi-year high) and inflation keeping rates up, all eyes are on earnings to support market valuations. As tomorrow is the unofficial start of earnings season, with major banks reporting, all eyes will be (read: should be) on credit quality and loan demand, which could tell us a lot about the impact the Fed has on the market,” Nelissen said.
“After all, I’m afraid the central bank may soon have to choose between fighting inflation and protecting financial stability,” Nelissen added.
Treasury yields were mixed after a bond sell-off in the previous session sparked by the CPI data. Traders also received a $22B 30-year bond auction that tailed for the first time since November 2023. The longer-end 30-year (US30Y) and 10-year yields (US10Y) were both up 4 basis points each to 4.67% and 4.58%, respectively. The shorter-end more rate-sensitive 2-year yield (US2Y) was down 2 basis points to 4.96%.
See how Treasury yields have done across the curve at the Seeking Alpha bond page.
Thursday also featured some global central bank action in the form of the European Central Bank’s (ECB) latest monetary policy decision. The ECB held its key interest rates at record highs, while sending signals that it may be getting ready for cuts.
Turning to active stocks, Regeneron Pharmaceuticals (REGN) ended among the top percentage losers on the Nasdaq (COMP:IND) after the U.S. Department of Justice filed a complaint against the drugmaker alleging it fraudulently inflated Medicare reimbursement rates for its blockbuster eye disease therapy Eylea.
