Dow up 100 points, Nasdaq touches 6-week high as banking fears ease, Fed officials speak

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U.S. stocks were higher but off the session’s best levels Thursday afternoon, after the Nasdaq Composite earlier touched levels unseen since mid-February, as banking-sector fears eased and U.S. economic data bolstered hopes for a peak in interest rates.

How are stocks trading
  • The S&P 500
    rose 17 points, or 0.5%, to 4,044

  • The Dow Jones Industrial Average
    gained 97 points, or 0.3%, to 32,817

  • The Nasdaq Composite
    advanced 72 points, or 0.6%, to 11,998. Earlier it traded as high as 12,038, its highest intraday level since Feb. 16, according to FactSet data.

On Wednesday, the Dow Jones Industrial Average rose 323 points, or 1%, to 32,718, its highest closing level since March 8 — the day that Silicon Valley Bank announced a doomed capital raise that led to its failure, helping to spark a transatlantic crisis of confidence in the banking sector.

What’s driving markets

Some encouraging economic data and waning banking-sector fears helped drive U.S. stocks modestly higher on Thursday, analysts said.

“Another day without any unwelcome banking surprises lifted markets as investors headed back towards a risk-on approach,” said Richard Hunter, head of markets at Interactive Investor.

Analysts also noted an improvement in market breadth, as cyclical sectors like industrials, materials and financials that have suffered in recent weeks helping to push the market higher. Although the technology-heavy Nasdaq remained in the lead, benefiting from the perception of safety.

See: Tech stocks back as a haven? ‘It’s a mistake,’ say market analysts

The Nasdaq Composite is currently traded at 11,998.38, up 17.4% from its bear-market low hit on December 28. The level needed to enter a new bull market is 12,255.95, according to Dow Jones Market Data.

The tech-focused Nasdaq-100 index
which tracks the top 100 non-financial companies listed on the Nasdaq exchange, exited a bear market on Wednesday, and is currently up 21.4% from its December 28 closing low, according to Dow Jones Market Data.

The S&P 500 index closed above the 4,000 mark once again on Wednesday, an important technical accomplishment that stoked hopes for a further rally.

Technical analyst Katie Stockton of Fairlead Strategies said in a note to clients that a breakout above 4,050 on the S&P 500 could help to propel the index back to its highest levels of the year, reached in early February.

She also noted that “breadth has improved as cyclical sectors have reversed an oversold bounce” in a note to clients.

Revised data on U.S. GDP growth showed the economy grew slightly more slowly during the final months of 2022, with the annualized growth rate slipping to 2.6% from 2.7% seen in the previous estimate. Slightly weaker exports and consumer spending were to blame, according to data released by the Bureau of Economic Analysis.

Meanwhile, weekly jobless claims data showed the number of Americans applying for new unemployment benefits ticked higher to 198,000 during the week ended March 25, up from 191,000 during the prior week. The reading surpassed the median estimate from economists polled by the Wall Street Journal, who had expected 195,000 initial claims.

The data helped support the case for the Fed to end its rate-hike campaign, said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.

“A tick up in jobless claims within the context of a downward-revised GDP could suggest Fed action is taking its toll, but it’s important to keep in mind that those claims are still relatively low, and GDP still shows growth,” Loewengart said in a note to clients.

See: The Stock Market Keeps Forging Ahead. 2 Big Reasons for the Optimism.

However, economic data reports are due out ahead of the conclusion of the Fed’s next two-day policy meeting, which ends May 3.

For example, the personal consumption expenditures index for February is due out Friday. The gauge is the Fed’s preferred measure of consumer price inflation, informing the central bank’s efforts to drive inflation back to its 2% target.

Boston Fed President Collins said Thursday the stress in the banking sector made it hard to know what was the appropriate interest-rate policy, but another one-quarter-percent rate hike seemed reasonable.

“I currently anticipate some modest additional policy tightening and then holding through the end of this year,” Collins said, in a speech to a National Association for Business Economics conference.

However, Richmond Fed President Barkin saws a “pretty wide” range of possible outcomes for path of interest-rate given the uncertainty facing the outlook.

“Most forecasts of our policy path seem to average the risk of higher inflation with the risk of further contagion in banking,” Barkin said in a speech to the Virginia Council of CEOs at the University of Richmond.

After the bell, the Fed is expected to release its H.4.1 report on bank lending at 4:30 p.m. Eastern Time.

Companies in focus
  • Roku Inc. shares
    fell 4.3% on Thursday after the streaming company said it would lay off 200 employees and exit some office facilities.

  • EVgo Inc.‘s stock 
    rallied 21.7% after the electric-vehicle charging infrastructure company reported a near four-fold forecast-beating climb in revenue, as losses narrowed sharply.

  • The SPDR S&P Regional Banking exchange-traded fund
    turned 1.6% lower after climbing earlier in the session, although it remained on track for a second-straight weekly gain. Within the ETF, shares of First Republic Bank
    PacWest Bancorp
    and of Western Alliance Bancorp
    also traded lower after opening in the green.

  • RH
    which operates furniture retailer Restoration Hardware, fell 3.1% after the group logged a decline in profit and sales in the latest quarter, reflecting ongoing challenges stemming from a slower economy.

  • Shares of Bed Bath & Beyond Inc.
    tumbled 25% after the retailer once again warned it may need to file for bankruptcy as it proposed a $300 million stock offering.

— Jamie Chisholm contributed to this article

Read the full article here

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