U.S. stock indexes rose on Thursday as a moderation in producer price inflation and jump in weekly jobless claims brought relief to investors worried about how far the Federal Reserve will hike interest rates to tame surging prices.
A Labor Department report showed producer prices unexpectedly fell in March as the cost of gasoline declined, and there were signs that underlying producer inflation was subsiding.
Data also showed that the number of Americans filing new claims for unemployment benefits increased more than expected last week, a further sign that labor market conditions were loosening up.
“This is a good indication that inflation is easing and dropping rather sharply. Jobless claims were also favorable news for the Fed,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“Inflation both at the consumer and producer levels are going south, in the right direction … even though elevated, it’s still good news and this is one big consideration in terms of the Fed ending its tightening cycle.”
The benchmark S&P 500 (.SPX) has traded in a tight range this month, having recovered from a selloff in March fueled by the recent banking crisis, as investors assessed the path for U.S. interest rates.
Wall Street closed lower on Wednesday after data showed consumer prices rose at a slower-than-expected pace in March, however, core prices remained sticky and supported the case for another 25-basis point rate hike by the Fed in May.
Investors mostly stuck to expectations of the 25-bps hike after Thursday’s data.
Minutes released on Wednesday from the Fed’s latest policy meeting indicated concerns of a recession following the banking sector stress and that several policymakers considered pausing rate hikes last month.
Big U.S. banks JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N) are scheduled to report quarterly results on Friday, and investors will watch them closely for details about the sector’s overall health.
Analysts expect S&P 500 companies to record a profit decline of 5.2% in the first quarter, as per Refinitiv IBES data, in what could be their worst showing since the third quarter of 2020.
Financial companies that are part of the S&P 500 are expected to report a profit growth of 4.3% in the first quarter.
At 9:43 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 18.09 points, or 0.05%, at 33,664.59, the S&P 500 (.SPX) was up 13.74 points, or 0.34%, at 4,105.69, and the Nasdaq Composite (.IXIC) was up 106.53 points, or 0.89%, at 12,035.87.
Advancing issues outnumbered decliners for a 2.00-to-1 ratio on the NYSE and a 2.22-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and one new low, while the Nasdaq recorded 29 new highs and 80 new lows.