Los Angeles Times
Stocks’ winning streak continues
Stocks on Wall Street closed higher Thursday, building on their winning week, as investors sifted through a deluge of news about the economy, interest rates and corporate profits.
The Standard & Poor’s 500 index rose 1% after shaking off an early stumble, returning to its highest level in six weeks. The Dow Jones industrial average also recovered from a midafternoon slide to end 0.5% higher, and the Nasdaq composite gained 1.4% as Tesla and technology stocks led the market.
Much of Wall Street’s focus was on Europe, where a years-long experiment with negative interest rates came to a close. In the United States, reports suggested the economy is slowing more than expected, while a better-than-expected profit report from Tesla headlined a mixed set from the nation’s biggest companies. Stocks briefly lost ground after President Biden tested positive for the coronavirus.
At the center of this year’s sell-off for financial markets has been the world’s punishingly high inflation and the moves made by central banks to squash it. On Thursday, the European Central Bank surprised markets when it raised interest rates more than expected, its first increase in 11 years.
“I was trading right when the ECB [news] came out and it actually caused longterm bonds to rally,” said Jay Hatfield, chief executive of Infrastructure Capital Advisors.
Investors also bid up stock prices. The S&P 500 rose 39.05 points to 3,998.95. The latest gains extended the benchmark index’s winning streak to a third day.
The Dow climbed 162.06 points to 32,036.90, and the Nasdaq added 161.96 points to close at 12,059.61. The major indexes are all on pace for a weekly gain.
Smaller-company stocks also rose. The Russell 2000 gained 8.74 points, or 0.5%, to close at 1,836.69.
As with the U.S. Federal Reserve, which is set to raise rates next week for a fourth time this year, the hope is that higher rates will slow the economy enough to beat back high inflation. The risk is that higher rates push down on investment prices, and too-aggressive increases could cause a recession.
In the U.S., some areas of the economy have already begun to soften.
The number of workers who filed for unemployment benefits last week was the highest in eight months, though it remains historically low.
A separate report released Thursday showed manufacturing in the midAtlantic region weakened by significantly more than economists expected.
The discouraging data helped pull Treasury yields lower and could steer the Federal Reserve toward less-aggressive increases on interest rates. That in turn could help support stocks.
The two-year Treasury yield, which tends to move with expectations for the Fed, slumped to 3.09% from 3.25% late Wednesday. Forecasts among traders for what the Federal Reserve will do at its meeting next week have tilted toward an increase of 0.75 percentage point and away from a colossal hike of a full percentage point.
The 10-year yield, which influences mortgage rates, fell to 2.90% from 3.03%.
The primary reason stocks have rallied this week on Wall Street has been strong profit reports from big U.S. companies. If they can deliver continued growth despite high inflation, that would prop up one of the two main levers that set stock prices. The other depends on where interest rates go.
Tesla climbed 9.8% in the first trading after the electric-vehicle maker reported results for the spring that were better than analysts expected. It was the biggest gainer in the S&P 500.
Steelmaker Nucor jumped 9.1% after its results topped forecasts. Philip Morris International, the tobacco company, rose 4.2% after reporting stronger profit than expected.