Stocks ended higher on Thursday, with the Nasdaq ending a four-day losing streak as technology stocks recovered some losses spurred by concerns over higher inflation and rates.
The Dow extended gains, reaching a fresh intraday and closing high by the end of the session. The S&P 500 traded 0.8% higher, led by gains in the financials and consumer staples sectors.
So far in May, investors renewed a rotation away from technology and growth stocks, with valuations viewed as stretched especially as prospects for rising rates increase. And given the strong stock market rally over the past year, some have worried that easy positive catalysts for equities may be running out, with the economic recovery already well under way and a strong earnings season almost in the rearview mirror. Recent Bank of America data showed that institutional clients sold equities for a third week in a row last week, and hedge fund clients posted their largest outflows in over a month as equity sentiment nears euphoria.
Many market participants are now considering whether the strength of the economic rebound and surge in consumer and business demand will lead to persistently high levels of inflation, prompting officials to ease up on the ultra-accommodative policies that had supported both the economy and asset prices. Private payrolls accelerated to rise by 742,000 in April, ADP reported Thursday, and Friday's jobs report from the Labor Department is expected to show a staggering 1 million non-farm payrolls returned last month.
"The question that matters the most is if asset managers will make a significant change in allocations to express an increased probability of a more persistent inflation," Marko Kolanovic, JPMorgan global markets strategist, wrote in a note. "We think that this shift in allocation will happen (regardless of how temporary inflation is), and new data points related to inflation will on margin cause investors to shorten duration, move from low volatility to value, and increase allocations to direct inflation hedges such as commodities."
"We expect this trend to persist during the reopening of global economies in the second half of this year," he added. "Given the still high unemployment, and a decade of inflation undershoot, central banks will likely tolerate higher inflation and see it as temporary. Portfolio managers likely will not take chances and will reposition portfolios."
4:05 p.m. ET: Dow adds 316 points, or 0.9%, to set new record high; Nasdaq ends four-day losing streak
Here were the main moves in markets as of 4:05 p.m. ET:
S&P 500 (^GSPC): +34.03 (+0.82%) to 4,201.62
Dow (^DJI): +318.19 (+0.93%) to 34,548.53
Nasdaq (^IXIC): +50.42 (+0.37%) to 13,632.84
Crude (CL=F): -$0.80 (-1.22%) to $64.83 a barrel
Gold (GC=F): +$30.30 (+1.70%) to $1,814.60 per ounce
10-year Treasury (^TNX): -2.3 bps to yield 1.5610%
9:31 a.m. ET: Stocks open mixed, Nasdaq drops again
Here's where markets were trading after the opening bell Thursday morning:
S&P 500 (^GSPC): -3.3 points (-0.08%) to 4,164.29
Dow (^DJI): +48.96 points (+0.14%) to 34,279.30
Nasdaq (^IXIC): -53.67 points (-0.4%) to 13,526.00
Crude (CL=F): -$0.13 (-0.2%) to $65.50 a barrel
Gold (GC=F): +$7.00 (+0.39%) to $1,791.30 per ounce
10-year Treasury (^TNX): unchanged, yielding 1.584%
8:30 a.m. ET: Jobless claims reach new pandemic-era low, dipping below 500,000
New weekly jobless claims set a new pandemic-era low last week, falling below 500,000 for the first time since March 2020, with initial filings trending decidedly lower in recent weeks amid the pick-up in economic activity.
Initial filings totaled 498,000 during the week ended May 1. This was better than the 538,000 consensus economists were expecting, according to Bloomberg data, and improved from the upwardly revised 590,000 reported for the previous week.
Continuing claims unexpectedly rose for the week ended April 24 to 3.690 million however, coming in above last week's 3.653 million.
8:20 a.m. ET: Nearly 9 out of 10 S&P 500 companies topped Q1 earnings estimates as corporate profits pick up: Credit Suisse
Companies have largely blown past estimates throughout first-quarter earnings season, with corporate profits rising in tandem with expanding economic activity.
To date, companies comprising 85.1% of the S&P 500's market capitalization have reported first-quarter earnings results, according to an analysis from Credit Suisse analyst Jonathan Golub. Of these, 86% of companies have beat estimates, and earnings have topped estimates by 22.4% in aggregate. Financials were the biggest outperformer, with components exceeding forecasts by an average of 33.9%.
However, even these strong earnings results have been met with just a shrug by Wall Street. Companies topping both revenue and earnings estimates have outperformed the market by just 1.0% on average, versus the historical average of 1.4% outperformance, Golub added.
7:30 a.m. ET: Bank of England upgrades economic forecast, says UK economy will likely expand by 7.25% in 2021
The Bank of England upgraded its growth forecast for the UK on Thursday and said in its monetary policy decision that it would maintain its main lending rate at its current all-time low of 0.1%.
This year, the Bank of England anticipates GDP will grow 7.25% in the country, up from its forecast for 5% growth in February.
"Activity has been stronger over the recent past than was expected and the slightly earlier easing of restrictions also contributes to higher GDP in the very near term," the BOE said. "Over the forecast period, activity is boosted by an expectation that households will run down their savings by somewhat more than previously assumed."
The BOE also now sees inflation averaging 2.5% in 2021, up from its prior forecast for 2%, but said the rise in price pressures will likely be "temporary."
7:17 a.m. ET Thursday: Stock futures point to a higher open
Here's where markets were trading ahead of the opening bell:
S&P 500 futures (ES=F): 4,163.00, up 3 points or 0.07%
Dow futures (YM=F): 34,148.00, up 30 points or 0.09%
Nasdaq futures (NQ=F): 13,511.75, up 20.75 points or 0.15%
Crude (CL=F): -$0.36 (-0.55%) to $64.27 a barrel
Gold (GC=F): +$6.00 (+0.34%) to $1,790.30 per ounce
10-year Treasury (^TNX): -1.3 bps to yield 1.571%
6:13 p.m. ET: ET Wednesday: Stock futures open flat
Here's where markets were trading as the overnight session kicked off:
S&P 500 futures (ES=F): 4,159.5, down 0.5 points or 0.01%
Dow futures (YM=F): 34,113.00, down 5 points or 0.01%
Nasdaq futures (NQ=F): 13,491.00, unchanged
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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