Topline
The stock market moved higher on Thursday, adding to 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 solid gains so far this week: The Dow Jones Industrial Average rose 1.1%, over 300 points, while the S&P 500 gained 1.5% and the tech-heavy Nasdaq Composite 2.3%.
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 on Thursday, despite fears of a recession weighing on markets: The price of U.S. benchmark West Texas Intermediate jumped back above $100 to $102 per barrel, while international benchmark Brent crude now trades at $104 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 4% or more.
Key Background:
The S&P 500 posted its first four-day winning streak since late March, rebounding after markets recently recorded their worst first half of a year since 1970 as rising recession fears took a toll on investor sentiment. The S&P 500 is down roughly 19% so far in 2022, while the tech-heavy Nasdaq is down 27%.
Tangent:
Shares of video game retailer GameStop, meanwhile, jumped roughly 15% 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:
“We started the second quarter with the fear that bad things could happen—but we saw that these things were not as bad as initially feared,” says Brad McMillan, chief investment officer for Commonwealth Financial Network. “As we move into the second half of the year, many of those worries have already been priced in, while others do not look nearly as bad as they did a couple of months ago. This is real progress.”
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. Economists 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)