Written by Stephen Culp
NEW YORK (Reuters) – U.S. stocks closed higher on Thursday as new economic data reignited hopes that inflation will continue to cool, with tech-related momentum stocks taking the lead. .
Mega caps, which are sensitive to interest rates, have given the tech-heavy Nasdaq a decisive advantage. The S&P 500 also ended in positive territory, while the Dow ended almost unchanged.
The producer price index (PPI) was weaker than expected, confirming the narrative that price growth remains slow.
“This morning's numbers were a little more supportive of some sort of benign 'soft landing' outcome than yesterday's numbers,” said Brian Nick, senior investment strategist at Macro Institute. “I think it feels like a natural snapback from what was potentially an overreaction yesterday.”
Stocks fell sharply on Wednesday after the better-than-expected CPI data, sending benchmark U.S. Treasury yields to their highest level since November. The report dashed expectations that the central bank could cut rates up to three times by the end of the year, potentially starting as early as its June policy meeting.
“There are indications that the inflation numbers that the Fed really cares about, the PCE numbers, are not going to be as dire as the CPI,” Nick added. “And the parts of the market that were punished the most yesterday are recovering a little bit today.”
Although the PPI statistics were more encouraging, the data showed that the path of inflation moving downward toward the central bank's annual 2% target may be too meandering for the Fed.
“There is no clear need to adjust monetary policy in the very short term,” New York Fed President Williams said.
Richmond Fed President Thomas Barkin said the central bank was not yet convinced that upward pressure on prices would continue to ease.
“Investors are starting to absorb the possibility of inflation lasting a little longer, and the Fed will continue to be patient. That's their big word right now,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. ” he said.
Investors are now turning their focus to the first-quarter earnings season, when the three largest U.S. banks, JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo Co., Ltd., are scheduled to report results Friday morning.
The Dow Jones Industrial Average fell 2.43 points, or 0.01%, to 38,459.08, the S&P 500 rose 38.42 points, or 0.74%, to 5,199.06, and the Nasdaq Composite Index added 271.84 points, or 1.68%, to 16,442.20.
Of the 11 major sectors in the S&P 500 index, tech stocks led the way, while financial stocks lagged.
The FANG+ index of large-cap momentum stocks clearly outperformed, rising 2.6%.
CarMax fell 9.2% after the used car retailer said its fourth-quarter results missed analysts' expectations and it may miss long-term auto sales goals.
Globe Life fell 53.1% after Fuzzy Panda Research disclosed a short position in the company, alleging multiple claims of insurance fraud.
Rent the Runway soared 161.9% after the apparel rental company announced it was betting on artificial intelligence to drive growth this year.
Biotechnology company Alpine Immun Sciences will be acquired by Vertex Pharmaceuticals for about $4.9 billion in cash, the companies said. Alpine soared 36.9%.
On the New York Stock Exchange, advancing issues outnumbered declining issues by a 1.12-to-1 ratio. On the Nasdaq, a 1.23-to-1 ratio favored advancers.
The S&P 500 has recorded 11 new highs and 6 new lows in 52 weeks. The Nasdaq Composite Index recorded 51 new highs and 135 new lows.
Trading volume on U.S. exchanges was 10.39 billion shares, compared with an average of 11.48 billion shares traded over the past 20 trading days.
(Reporting by Stephen Culp; Additional reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru; Editing by David Gregorio)
