Stock indexes were mixed on Thursday after data showed producer prices rose at a slower-than-expected pace in December. Investors also parsed the latest jobless claims data and tuned into Congressional testimony from Federal Reserve Governor Lael Brainard. The beginning of fourth-quarter earnings season looms over the market.
The latest weekly unemployment insurance claims figures on Thursday showed continued progress in the U.S. labor market recovery. Initial jobless claims were 230,000, slightly above consensus and up from 207,000 a week earlier. Meanwhile, continuing claims declined to 1.56 million, from 1.75 million. Economists on average had been forecasting 1.76 million continuing claims, according to FactSet.
Inflation—and the scale of the Federal Reserve’s desire to rein it in—has been the driving force in the market recently, particularly after December’s consumer-price index hit its highest level since 1982.
In that respect, December’s producer-price index, released Thursday morning, has helped alleviate some of the concerns. It rose just 0.2% in December from November, below forecasts for a 0.4% increase, a sign that the pace of inflation might be slowing. Producer prices often lead consumer prices.
The December rise still brings the year-over-year increase in the producer price index to 9.7%, which is the highest in the history of the data series. The change in November producer prices was revised down to a 0.7% increase, from the 0.8% reported a month ago.
Investors had already brushed off Wednesday’s CPI, with stocks rising slightly on the back of the data as markets saw the upside. Inflation is seen nearing its peak and investors were worried about a much higher print.
“Yesterday’s market reaction could raise the hope that perhaps global inflationary pressures might be starting to diminish,” said Michael Hewson, an analyst at broker CMC Markets.
“This seems a little premature on the basis of one month’s numbers, however this afternoon’s U.S. PPI could add an extra quiver to that argument if we see a similar trend in today’s December numbers,” he added. “PPI has tended to be a leading indicator for headline CPI for most of last year, and is already well above CPI levels.”
The Fed’s Lael Brainard is testifying before the Senate Banking Committee on Thursday morning at her nomination hearing as the next vice chair of the central bank. Investors will be listening for clues about the central bank’s response to inflation. Brainard said Wednesday that inflation was “too high” and that lowering it would be a priority.
The latest indications from Fed officials have shown the central bank on track for earlier, faster interest-rate increases, with markets now pricing in three rate increases this year and the first in March. Tighter policy ahead, and an upbeat tone from the Fed on the strength of the U.S. economy, have seen bond yields rise in early 2022, pressuring stocks.
That trend resumed on Thursday, with the 10-year yield up slightly, to about 1.74%.
“Perhaps earnings season will bring some welcome normality to the markets after a period of fear, relief, and speculation,” wrote Craig Erlam, senior market analyst, UK & EMEA, at currency broker OANDA. “The fourth quarter is expected to have been another strong quarter, although the emergence of omicron will likely have had an impact during the critical holiday period for many companies. Of course, as we’ve seen throughout the pandemic, that will likely have been to the benefit of others.”
Wall Street consensus calls for a 20.3% year-over-year rise in S&P 500 earnings per share in the fourth quarter, according to data from Credit Suisse strategist Jonathan Golub. The fastest growth is expected to come from more cyclical sectors of the index, such as energy, materials, and industrials.
In the commodity space, crude prices continued their steady upward march, with futures contracts for international oil benchmark Brent up 0.2% to near $85 a barrel. U.S. futures for West Texas Intermediate crude were similarly higher at almost $83.
Cryptocurrencies were inching higher again Thursday, with Bitcoin —the leading crypto—up almost 1% over the last 24 hours, to around $44,000, according to data from CoinDesk. Smaller peer Ethereum was about flat, near $3,375.
Here are eight stocks on the move Thursday:
Chip group Taiwan Semiconductor Manufacturing Co. (TSM) rose 8.5% after posting strong quarterly results. The world’s largest contract semiconductor manufacturer saw a 16.4% jump in net profit on a 21.2% spike in sales amid strong demand and tight supply.
Virgin Galactic (SPCE) stock tumbled 15% after the space tourism company said it plans to raise up to $500 million via a sale of convertible senior notes. It also reported preliminary fourth quarter free cash flow.
Snap (SNAP) stock fell 6% after Cowen analysts downgraded the stock to the equivalent of Hold, from the equivalent of Buy. They cited the stock’s pricey valuation and the potential for continued headwinds from changes Apple (AAPL) made to its iOS operating system.
Moderna (MRNA) declined 4.5% after announcing that the data from its vaccine trial in two- to five-year olds would be reported in March.
Boeing (BA) has risen 3% on reports China could reinstate the 737 Max sometime this month.