U.S. stocks edge higher as Treasury yields retreat and labor data beat forecasts
The S&P 500 rose modestly after Treasury yields fell and jobless claims came in below expectations, while the energy sector led gains amid higher oil prices.
U.S. equities recovered from early losses on Thursday, with the S&P 500 gaining 0.2% to close at 7,666.48 after rebounding from a two-week low. The rally followed a reversal in the bond market, as Treasury yields slipped when investors bought back bonds and Federal Reserve Vice Chair Philip Jefferson signaled patience on further rate hikes.
The Labor Department reported initial jobless claims of 197,000, under the 200,000 forecast, reinforcing the view that the labor market remains solid ahead of the payrolls report due Friday. Treasury yields had earlier surged to a 24-year high on concerns that a dip in the Institute for Supply Management manufacturing PMI and rising input prices could reignite inflation worries.
"Even though valuations have come down, the market's still not cheap, so I'm not bearish on the equity market. We can chug along, but I expect higher volatility in both equities and bonds," said Scott Welch, chief investment officer at Certuity. "Everybody's adjusting to a new normal. There's nothing particularly scary about what's happening in the markets right now; it's just a little bit different than what people have been used to operating in over the past few years, and it's going to take some adjustment."
The Dow Jones Industrial Average edged up 0.04% to 50,926.74, while the Nasdaq Composite rose 0.04% to 26,871.60. Energy stocks led sector gains, with the S&P 500 energy index up 1.9% after Brent crude rose more than $4 per barrel following China's suspension of fuel exports. Technology shares also advanced, boosted by a 1% rally in Accenture after the firm forecast revenue growth above estimates, and a 3% rise in Micron Technology on a strong revenue outlook and $32 billion in customer commitments.
Inflation data released on Wednesday was softer than expected, reducing market expectations for a rate hike at the Fed's October meeting. The CME FedWatch tool showed the probability of a 25-basis-point increase falling to 28.2% from 68.6% a week earlier. After Jefferson's comments, Minneapolis Fed President Neel Kashkari said additional rate hikes would likely be needed to restrain the economy through 2027, though he was uncertain about the timing of the next move.
Advancing stocks outnumbered decliners on both the NYSE (1.23-to-1) and Nasdaq (1.04-to-1). Trading volume reached 17.25 billion shares, slightly above the 20-day average.