Stocks rise as economy strengthens, central banks step back

NEW YORK—U.S. stocks mostly rose Thursday, as markets get accustomed to the idea of investing with less of a safety net from central banks around the world.

The European Central Bank laid out its plan to pull back from the stimulus it’s pumped into markets, but it also said it plans to hold off on raising interest rates for longer than some investors expected. More evidence arrived that the U.S. economy is improving, meanwhile, which helped send the S&P 500 to its fourth gain in the last five days.

The S&P 500 index rose 6.86 points, or 0.2 percent, to 2,782.49. The Dow Jones industrial average slipped 25.89, or 0.1 percent, to 25,175.31, and the Nasdaq composite rose 65.34, or 0.8 percent, to 7,761.04, a record. Roughly four stocks rose for every three that fell.

For years since the Great Recession, central banks around the world have thrown massive amounts of stimulus at markets, chiefly through the purchase of billions of dollars of bonds each month. That era neared its end after Europe’s central bank said it will begin phasing out its bond-buying program in the autumn before ceasing it after December.

The European Central Bank also said it will hold off on raising interest rates until at least the summer of 2019, which was more accommodative than some investors had expected.

Its U.S. counterpart, the Federal Reserve, has already halted bond purchases and has increased interest rates seven times since late 2015. Its latest move came Wednesday, when it raised its benchmark rate by another quarter of a percentage point and indicated two more increases may come this year thanks to the improving economy. Higher rates can stave off inflation, but they can also hinder economic growth.

Both the Fed and the ECB have said that their next moves will depend on what the economic data says, and if growth is strong enough, they’ll raise rates more quickly. That could make markets around the world more volatile, Schutte said, as investors handicap what each weekly or monthly economic report means for interest rates.

On Thursday, the data for the U.S. economy were nearly uniformly encouraging.

Retail sales jumped in May after shoppers spent more at home and garden stores, gas stations and restaurants. It was the strongest gain in six months, and it fits with economists’ projections that economic growth is picking up following a slowdown during the first quarter of the year.

A separate report showed that fewer U.S. workers filed for unemployment claims last week than expected, an encouraging sign for the labor market.

The yield on the 10-year Treasury fell to 2.93 percent from 2.98 percent late Wednesday. It gave up gains from the prior day, when the Federal Reserve surprised some investors by speeding up its timetable for rate increases.

Lower interest rates can hurt banks by crimping the profit they make from making loans. Financial stocks in the S&P 500 fell 0.9 percent for the biggest loss among the 11 sectors that make up the index.

Stocks from developing economies continued their struggles, which have been compiling since the spring. Investors worry that higher U.S. interest rates will hurt emerging-market economies.

The dollar rose to 110.57 Japanese yen from 110.55 yen late Wednesday. The euro fell to $1.1591 from $1.1773, and the British pound fell to $1.3281 from $1.3358.

In the commodities markets, benchmark U.S. crude rose 25 cents to settle at $66.89 per barrel. Brent crude, the international standard, fell 80 cents to $75.94.

Heating oil fell 3 cents to $2.16 per gallon, wholesale gasoline dropped 3 cents to $2.09 per gallon and natural gas was close to flat at $2.97 per 1,000 cubic feet.