Stocks notch best three-day rally since May
Stocks rose Thursday amid a rally in megacaps as strength in the corporate sector buoyed investor sentiment. Treasuries gained as data pointed to weakness in the U.S. economy.
The S&P 500 posted its biggest three-day gain since May 27, led by tech and consumer discretionary stocks on Thursday. Tesla topped the leader board after its quarterly results beat estimates, with Apple and Amazon.com also pushing higher ahead of earnings due next week. Stocks briefly hit session lows in morning trading on news of President Joe Biden testing positive for the coronavirus.
In post-market trading, Snap Inc. plunged more than 20 percent after the company reported revenue that missed estimates, citing a slowdown in the ad industry. That weighed on socialmedia peers Meta Platforms and Pinterest.
Treasury yields dropped, with the 10-year rate sinking 14 basis points to 2.88 percent after a knee-jerk move higher following the European Central Bank’s greater-than-expected rate hike. Data showing a rise in jobless claims suggested softening in the labor market, while the Philadelphia-area manufacturers’ outlook for business conditions slumped to the lowest since 1979 and the Conference Board’s leading economic index fell more than estimated.
Markets were buffeted in early trading after the ECB hiked rates by 50 basis points, the first increase in 11 years and biggest since 2000. It comes as a brewing political crisis in Italy ramps up the pressure on the ECB to shield the most vulnerable eurozone members from market speculation through a new crisis management tool. The euro climbed on the decision before paring those gains against the dollar.
“There’s enough circuit breakers in the market, particularly when you think about the strength of the consumer, the strength of the corporate sector and how well telegraphed this potential recession has been,” said Stephen Parker, head of advisory solutions at JPMorgan Private Bank. “Because of that, a lot of that pain has already been felt by markets.”
The S&P 500 has climbed about 9 percent from a multiyear trough in mid-June amid earnings optimism and speculation the Federal Reserve will take a more measured approach to tightening policy. Whether the market has bottomed remains open to debate, but over the past month, yields have fallen and rates markets have discarded bets for a full percentage point hike when the Fed meets next week.
Still, sentiment remains fragile amid accelerating inflation and the prospect of a steep downturn in global economies as well as the geopolitical risks, notably in Europe.