4:05pm: US stocks rally at the close
The Dow, S&P 500 and the Nasdaq rallied on Thursday to close higher, as positivity surrounding the latest inflation read led to hopes that the US Fed could put a pause on rate hikes next month.
At the close, the Nasdaq led the way, up 2% to 12,166, the Dow gained 1.1% to 34,030, and the S&P 500 added 1.3% at 4,146.
Wall Street was "given new life" by weaker US inflation figures, says Chris Beauchamp, chief market analyst at online trading platform IG.
“The afternoon has seen stocks bolstered by weaker PPI figures in the US, along with a rise in jobless claims. This means that the market is once again back to hoping that more bad news will tilt the Fed further towards a pause beyond the next meeting, though hopes for a ‘no change’ at the upcoming get-together remain dim.”
Tomorow sees the start of US earnings season, with the big banks set to report in the morning. Investors will keep a sharp eye on results from JPMorgan, Wells Fargo and Citigroup.
"Tomorrow’s bank figures of course will focus on the prospect of any further crisis in the sector, and hints that credit conditions are worsening could also go into the ‘bad news is good news’ pile (as long as there isn’t too much of it)," Beauchamp noted.
12.05pm: March PPI shows inflation continues to cool
US stocks were sharply higher in noon trading after March’s producer prices index (PPI) declined by a better-than-expected 0.5% month over month.
At midday, the Dow gained 170 points to 33,817, while the S&P 500 added 30 points at 4,122 and the tech-heavy Nasdaq rose 176 points to 12,105.
“The market was a little poised to potentially go up on any positive news, and in this case, the PPI number was quite a bit better than expected. And I think that gives people some comfort that in fact the Fed probably doesn’t have to raise rates in the next meeting,” Spouting Rock Asset Management’s Rhys Williams said.
Notable movers included shares of Harley-Davidson, Inc, which slipped more than 4% after UBS analysts said retail declines for the motorcycle maker in the first quarter may be worse than expected.
9:40am: PPI delivers downside surprise
Stocks moved higher at the open on Thursday as investors were buoyed by more economic data showing that inflation is cooling in the US.
Wholesale inflation fell significantly from 4.6% in February to 2.7% in March, according to the Producer Price Index published by the Bureau of Labor Statistics. Prices fell 0.5% month-over-month.
Analysts had expected the annual PPI to come in at 3% with no monthly change.
Meanwhile, initial jobless claims for last week came in higher than expected at 239,000, above the consensus analyst expectation of 232,000 claims and the 228,000 claims recorded in the previous week.
“Whilst the unemployment rate in the US remains near historical lows, today’s figure shows a sign that unemployment could be starting to pick up,” commented BRI Wealth Management portfolio manager Tom Hopkins.
He noted that the minutes of the Fed’s March monetary policy meeting released on Wednesday showed officials are predicting a mild recession starting later this year as the effect of interest rate increases starts to be seen in the real economy.
“It’ll be interesting to see how the jobless numbers progress over the coming weeks as this will have an impact on the Fed interest rate decision in May,” Hopkins said.
“This week’s inflation print showed the Fed is winning its fight against inflation and if the job market continues to weaken, the case for policymakers to pause with rate increases will strengthen, though I believe the Federal Reserve may be tempted by one more hike.’’
Just after the market opened, the Nasdaq had added 0.8% at 12,020 points, the S&P 500 was up 0.3% at 4,105 points, and the Dow Jones was 0.1% higher at 33,685 points.
6:30am: Earnings season looming
Wall Street is likely to open flat to moderately higher on Thursday as investors look to weekly jobless claims and March’s producer price inflation (PPI) data, out today, as well as quarterly earnings from some of the US’s largest banks for further direction.
Futures for the Dow Jones Industrial Average (DJIA) were steady in pre-market trading, while those for the broader S&P 500 index gained 0.1%, and contracts for the Nasdaq-100 added 0.2%.
The DJIA snapped a four-session winning streak on Wednesday, following the other benchmarks lower, as minutes from the Federal Reserve’s March policy meeting seemed to drive recession fears. That followed consumer inflation data for March that showed core inflation remains sticky while headline inflation surprised to the downside. The DJIA closed 0.1% lower at 33,647, the Nasdaq Composite fell 0.9% to 11,929, and the S&P 500 shed 0.4% to 4,092.
“Last night’s Fed minutes didn’t tell us much more than what we already knew from the post-meeting statement and (Chair Jerome) Powell’s press conference, with European markets finishing the day higher, while US markets slipped back,” commented CMC Markets’ Michael Hewson.
“The recent banking turmoil appears to have tempered the reaction function of many Fed officials in terms of how many more hikes are needed to keep a lid on prices, while the risks of a modest recession have increased, according to Fed staffers. The primary focus for now still remains on inflation which is still too high and sticky, and a labour market that is proving increasingly resilient," he added.
With no data of note on the docket for today aside from weekly jobless claims and the PPI, TickMill Group market analyst Patrick Munnelly noted that investors will look towards the start of first-quarter earnings season, with many of the tier-one banking franchises set to announce earnings in the coming days.
The Producer Price Index (PPI) is expected to show a flat month-over-month reading for March, implying an annual headline rate of 3%, while core inflation is expected to show a 0.3% monthly rise, taking the annual rate to 3.4% from 4.4% in February.
“Tomorrow sees the major banking marquees of JPMorgan, Citi and Wells Fargo set to announce performance for the quarter,” Munnelly said.
“Given the Fed's focus on credit conditions, banking earnings will give timely insights into the credit landscape. Investors will also be keen to track the regional banks' earnings given the recent turbulence amongst their peers, especially given Bank of South Carolina’s recent announcement around margin erosion as the bank highlighted a significant increase in deposit costs given the surge in competition with larger banks, brokerages and the US Treasury,” he added.