Topline
The stock market moved higher on Thursday, looking to build on recent gains a day after the Federal Reserve reaffirmed its commitment to bringing down inflation with more big rate hikes and tighter monetary policy, a move which helped ease recession fears somewhat.
Key Facts
Stocks added to modest gains so far this week: The Dow Jones Industrial Average rose 0.7%, over 200 points, while the S&P 500 gained 0.9% and the tech-heavy Nasdaq Composite 1.3%.
Markets got a boost after weekly jobless claims data showed that Americans filing for unemployment benefits edged higher to 235,000—while economists had been expecting claims to fall slightly, to 230,000—suggesting the tight labor market might be loosening.
Stocks have been rallying since the release of the June meeting minutes from the Federal Reserve, which warned that high consumer prices could become “entrenched” for longer but pledged to use “more restrictive” policy as needed.
With surging inflation showing few signs of moderating, Fed policymakers plan to raise interest rates by either 50 or 75 basis points at the upcoming meeting in July—though markets are pricing in a roughly 96% probability that the Fed will deliver a 75 basis point rate hike, according to CME Group.
Oil prices rebounded somewhat on Thursday, despite fears of a recession weighing on markets: The price of U.S. benchmark West Texas Intermediate jumped back above $100 per barrel, while international benchmark Brent crude now trades at $103 per barrel.
With oil rising, energy stocks were among some of the biggest gainers on Thursday, with shares of Chevron and Exxon Mobil both rising by 2% or more.
Key Background:
The S&P 500 is on track to record its first 4-day winning streak since at least May, even as markets recently posted their worst first half of a year since 1970 as rising recession fears take a toll on investor sentiment. The S&P 500 is down roughly 19% so far in 2022, while the tech-heavy Nasdaq is down roughly 27%.
Tangent:
Shares of video game retailer GameStop, meanwhile, jumped roughly 9% in early trading after the company announced a 4-for-1 stock split that was approved by its board and will go into effect on July 21.
Crucial Quote:
“The data are (finally) moving in the Fed’s direction… it’s never a good thing to see layoffs, but the pressure on wages may have now peaked,” says Jamie Cox, managing partner for Harris Financial Group. “A few more weeks of these types of numbers and maybe, just maybe, financial conditions are tight enough to allow the Fed to throttle back on the scale of rate increases.”
What To Watch For:
With recession fears “front and center” in recent weeks, many investors are nervously awaiting the Labor Department’s official jobs report, which is due Friday. Economist expect that the U.S. economy will have added 250,000 jobs in June, though that estimate is far below the 390,000 jobs added in May.
Further Reading:
Federal Reserve Prepares More Big Rate Hikes Amid Risk That High Inflation Could ‘Become Entrenched’ (Forbes)
Stocks Claw Back Losses Despite Yield Curve Inversion And Global Recession Fears ‘Front And Center’ (Forbes)
Stocks Close Out Worst First Half Of A Year Since 1970 (Forbes)