Stocks ended mostly higher on Thursday after new jobless claims came in lower than expected, further underscoring the strength of the post-pandemic economic rebound.
The Dow outperformed, adding more than 100 points, or 0.4%. The S&P 500 also increased, while the Nasdaq flipped into slightly negative territory.
Shares of work-from-home software stocks Okta (OKTA) and Workday (WDAY) slid despite each posting first-quarter results that beat estimates, with Okta announcing the departure of its chief financial officer. Nvidia (NVDA) shares were also off slightly even after posting estimates-topping first-quarter results, as the semiconductor company signaled chip shortages would likely constrain supply in the second half of the year.
The broader stock indexes have drifted this week, with volatility subsiding as investors awaited more economic data that might signal whether inflation would lead to a sustained jump in prices for consumers and producers and push rates higher. This could in turn weigh on stock valuations and put the brakes on the stock rally since last year’s lows.
“Inflation has gone from being on no one’s radar screen maybe five years ago as a lead concern, to now being at the absolute forefront as you see the economy rebound off of COVID lows,” Todd Jablonski, chief investment officer at Principal Global Asset Allocation, told Yahoo Finance. “[There’s been] a tremendous acceleration in earnings, coupled with massive monetary and fiscal stimulus. It’s enough to really cause lift-off on a variable that’s been stuck at below 2% growth for some time.”
“We’d actually welcome a bit of inflation coming to the U.S. economic picture,” he added, noting that core inflation could exceed 3.5% to 4% in the short-run. “We think the real question is … where do we settle post the surge? Is it more around that 2.75% or 3%? We’re going to be watching the data to see just how permanent some of these inflation forces are and how they affect the capital market outlook.”
One of the closely watched economic data reports on Thursday was on new weekly jobless claims, which fell for a fourth straight week and to yet another pandemic-era low. The second print on first-quarter gross domestic product from the Bureau of Economic Analysis showed U.S. GDP rose by 6.4%, and with core personal consumption expenditures rising by an upwardly revised 2.5% over the final three months of 2020.
With the economic recovery still under way, some strategists suggested that cyclical and value stocks remain an area of opportunity for investors, even as tech stocks outperformed this week.
“I think you still have more room to run if you’re a value investor at this point,” David Ragland, IRC Wealth CEO, told Yahoo Finance. “Because if you look at certain selected groups such as financials, energy, cyclicals, they still have a lot of room to run with low PEs [price-to-earnings ratios], as well as historically coming off of major market bottoms, they can be up 150%, 175%, 200%, top to bottom.”
Others offered a similar take.
“On value versus growth, that tipping point really happened in November of last year,” said Stephen Dover, Franklin Templeton chief market strategist. “We see more opportunity as the economic expands in value stocks in the United States, but also outside of the United States.”
4:03 p.m. ET: Stocks end mostly higher, Dow gains 139 points, or 0.4%, after jobless claims improve to new pandemic-era low
Here were the main moves in markets as of 4:03 p.m. ET:
S&P 500 (^GSPC): +4.69 (+0.11%) to 4,200.68
Dow (^DJI): +139.42 (+0.41%) to 34,462.47
Nasdaq (^IXIC): -1.72 (-0.01%) to 13,736.28
Crude (CL=F): +$0.58 (+0.88%) to $66.79 a barrel
Gold (GC=F): -$2.60 (-0.14%) to $1,901.20 per ounce
10-year Treasury (^TNX): +3.6 bps to yield 1.6100%
2:45 p.m. ET: Choppiness in equity trading will last ‘probably for most of the summer’: Strategist
Stocks this week have moved mutedly relative to the volatile shifts seen in recent weeks. The flow of quarterly earnings results has slowed down, and investors are awaiting more economic data to confirm whether inflationary pressures do prove to be transitory.
“We’re going to be in this probably for most of the summer,” Chris Versace, Tematica Research chief investment officer, told Yahoo Finance on Thursday, said of the choppiness in the major stock indexes. “When we think of the push-pull of what we’re getting, we’re getting the positives of the reopening trade, where the economic data is coming in better than expected … [but] we continue to see supply chain shortages that are leading to these inflationary prices that we keep hearing about.”
“I think it’s going to take some time for capacity to come up, until we start to see supply chains return to more normalized levels, and then I think we’ll be a little more balanced,” he added. “And perhaps that is what the Fed is looking for when they talk about more normalized patterns, not necessarily the transitionary data we’re seeing these days.”
“Look for companies that can pass those prices through, keep them sticky, and then perhaps not give up as much as that pricing later on,” he added.
12:52 p.m. ET: Boeing shares lead Dow higher after company agrees to pay at least $17 million over production issues with 737 jets
Shares of Boeing (BA) rose more than 3% Thursday afternoon, outperforming in the 30-stock Dow after the company agreed to pay at least $17 million to settle enforcement cases with the Federal Aviation Administration over production issues with its 737 jets.
“The FAA found that the Chicago-based manufacturer installed equipment on 759 Boeing 737 Max and NG aircraft containing sensors that were not approved for that equipment; submitted approximately 178 Boeing 737 Max aircraft for airworthiness certification when the aircraft potentially had non-conforming slat tracks installed; and improperly marked those slat tracks,” according to a statement from the FAA.
The settlement charges add to other payments the company has also made relating to its 737 Max jets. Boeing in January said it agreed to settle federal criminal charges for about $2.5 billion relating to the two plane crashes that killed 346 people in total and led to the global grounding of the 737 Max.
10:02 a.m. ET: Pending home sales unexpectedly fell in April, with record-low inventory weighing on purchases
Pending home sales posted a surprise month-on-month drop in April, falling by the most since February’s weather-impacted report as tightening inventory levels curbed home-buying activity.
The National Association of Realtors reported Thursday that pending home sales fell by 4.4% in April over March, more than reversing the prior month’s 1.7% increase. Still, pending home sales were up 53.5% over last year on an unadjusted basis, bouncing strongly off last year’s pandemic-depressed lows.
The drop was “in part due to record-low inventory of homes for sale in the first quarter of 2021,” the National Association of Realtors said in a statement. This has in turn pushed prices up and weighed on affordability.
“The Midwest region, which has the most affordable homes, was the only region to notch a gain in the latest month,” said Lawrence Yun, chief economist for the National Association of Realtors. “Some buyers from the expensive cities in the West and Northeast, who have the flexibility to move and work from anywhere, could be opting for a larger-sized home at a lower price in the Midwest.”
9:33 a.m. ET: Stocks open mostly higher, Dow adds 200+ points
Here’s where markets were trading after the opening bell:
S&P 500 (^GSPC): +12.44 points (+0.3%) to 4,208.43
Dow (^DJI): +218.39 points (+0.64%) to 34,541.44
Nasdaq (^IXIC): -10.31 points (-0.08%) to 13,727.69
Crude (CL=F): -$0.09 (+0.14%) to $66.12 a barrel
Gold (GC=F): -$8.50 (-0.45%) to $1,895.30 per ounce
10-year Treasury (^TNX): +3.7 bps to yield 1.611%
8:45 a.m. ET: Durable goods orders unexpectedly declined in April
Durable goods orders, or orders for manufactured goods intended to last at least three years, unexpectedly declined in April, ending an 11-month streak of increases, the Commerce Department said Thursday.
Durable goods orders fell by 1.3% in April, according to the government’s preliminary monthly report, following an upwardly revised rise of 1.3% in March. This also missed estimates for an increase of 0.8%, according to Bloomberg data.
Non-defense capital goods orders excluding aircraft rose 2.3%, or more than double the 1.0% increase expected. This metric serves as a closely watched proxy of business capital expenditures.
Non-defense capital goods shipments excluding aircraft, which factors into gross domestic product calculations, increased 0.9%. This also topped estimates for a 0.8% rise.
8:30 a.m. ET: Jobless claims set new pandemic-era low
New jobless claims fell for a fourth straight week to 406,000, setting a new 14-month low as labor market conditions improved further during the pandemic-era recovery.
Initial filings totaled 406,000 during the week ended May 22, coming in below the 425,000 expected, according to Bloomberg-compiled data. The prior week’s level was unrevised at 444,000.
Continuing claims also came in lower than expected at 3.642 million, versus the 3.680 million expected.
7:17 a.m. ET: Thursday: Stock futures edge lower
Here’s where markets were trading Thursday morning:
S&P 500 futures (ES=F): 4,185.50, +7.5 points (-0.18%)
Dow futures (YM=F): 34,281.00, +1.00 point (+0.00%)
Nasdaq futures (NQ=F): 13,651.00, -49.25 points (-0.36%)
Crude (CL=F): -$0.57 (-0.86%) to $65.64 a barrel
Gold (GC=F): -$5.40 (-0.28%) to $1,895.80 per ounce
10-year Treasury (^TNX): +2 bps to yield 1.594%
6:21 p.m. ET Wednesday: Stock futures advance
Here’s where markets were trading Wednesday evening:
S&P 500 futures (ES=F): 4,195.75, +2.75 points (+0.07%)
Dow futures (YM=F): 34,311.00, +31.00 points (+0.09%)
Nasdaq futures (NQ=F): 13,709.00, +8.75 points (+0.06%)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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