NEW YORK (AP) — A rally in big tech stocks Thursday helped U.S. stock indexes recover most of their losses from the day before.
The S&P 500 index rose 38.42 points, or 0.7%, to 5,199.06, reversing most of its earlier losses on concerns that interest rates will remain high for some time. The Nasdaq Composite Index rose 271.84 (1.7%) to a record high of 16,442.20. The Dow Jones Industrial Average, which is less focused on tech stocks, lagged. It fell 2.43 points (less than 0.1%) to 38,459.08.
Apple was the strongest force lifting the market, rising 4.3% to narrow its previous year’s loss. Nvidia continues to ride the artificial intelligence technology frenzy and is close behind. The company rose 4.1%, giving its annual profit 83%. Amazon rose 1.7%, setting a record and surpassing its all-time high set in 2021.
This is a return to last year’s form, when a small number of big tech stocks were responsible for much of the market’s rally. This year, profits were widening. That was, until concerns about persistently high inflation sent a chill through financial markets.
In the bond market, which has been driving much of the action on Wall Street, U.S. Treasury yields remained relatively stable following mixed data on inflation and the U.S. economy.
When, or if, the Federal Reserve will cut interest rates that traders desperately want is one of the key questions dominating Wall Street. Traders had expected at least six rate cuts this year, but have since sharply scaled back their expectations. Concerns are growing that inflation progress over the past year is stalling after a series of hotter-than-expected reports on inflation and the economy. Many traders now expect just two rate cuts in 2024, with some even discussing the possibility of zero.
Thursday morning’s report showed that wholesale-level inflation was slightly lower than economists expected last month. While this is encouraging, the data also showed that the underlying trend in inflation is either close to or slightly above expectations. These numbers remove the impact of notoriously high fuel and other prices, which economists say gives a better picture of where inflation is heading.
Chris Larkin, managing director of trading and investments at E-Trade, said the latest information does not offset Wednesday’s disappointingly high report on U.S. consumer-level inflation, but “at least “It may ease investor nerves in the short term.” Morgan Stanley.
A separate report found fewer U.S. workers filed for unemployment benefits last week. This is the latest sign that the job market remains remarkably strong despite high interest rates.
The Fed has kept its key interest rate at the highest level since 2001, hoping to depress the economy and investment prices enough to curb high inflation. The concern is that if interest rates remain too high for too long due to persistently high inflation, it could trigger a recession.
Some investors are now warning that a Fed rate cut could be seen as a red flag more than anything else, and could only happen if the economy and job market are weak enough to warrant further rate hikes. are doing.
All of this is happening at a time when the U.S. stock market has soared more than 20% since Halloween, which critics have already called too high. Interest rates need to fall or corporate earnings need to strengthen for stock prices to look more reasonable without requiring a sharp decline.
Earnings season has just begun, when companies report their profits for the first three months of the year to investors.
Rent the Runway reported slightly better-than-expected revenue for its latest quarter, more than doubling. The company, which rents designer clothing to customers, also said it expects to break even on a cash flow basis next fiscal year. The company’s stock price soared 161.9%.
Alpine Immun Sciences soared 36.9% after Vertex Pharmaceuticals agreed to buy the biotechnology company for $4.9 billion in cash.0.7% vertices added
CarMax slumped to one of the biggest losses in the S&P 500 after reporting its latest quarterly profit was lower than analysts expected. Business conditions have become even more difficult due to rising interest rates on auto loans, stricter lending standards, and declining consumer confidence. The company’s stock price fell 9.2%.
In the bond market, the yield on the 10-year U.S. Treasury rose to 4.57% from 4.55% late Wednesday. The two-year Treasury yield, which more accurately reflects expectations for Fed action, fell to 4.94% from 4.97%.
In overseas stock markets, indexes across Europe fell slightly after the European Central Bank left its key interest rates unchanged.
Stock prices were mixed in Asia, with South Korea’s Kospi rising 0.1% following the ruling Conservative Party’s crushing defeat in parliamentary elections.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
