Wall Street is recovering some of its losses from earlier in the week as pressure eases in the bond market on Thursday.
In afternoon trading, the S&P 500 showed a 0.3% increase, rebounding from consecutive losses. The Dow Jones Industrial Average edged up by 14 points, less than 0.1%, as of 1:51 p.m. Eastern time, while the Nasdaq composite recorded a 0.8% gain.
Big Tech stocks, including a 2.9% climb for Apple, played a pivotal role in leading the recovery. Fastenal saw a significant jump of 5.9%, marking the largest gain in the S&P 500. This surge followed the distributor’s report of a larger-than-expected quarterly profit, helping to offset a warning from Humana about how higher costs would impact its profit. The insurer, in response, tumbled 10.2%.
Stocks displayed overall steadiness as Treasury yields in the bond market slowed their earlier ascent from the beginning of the week. Yields had been rising as traders adjusted their forecasts for the timing of the Federal Reserve’s interest rate cuts. The higher yields, in turn, affected stock prices and raised pressure on the economy.
The Federal Reserve has signaled a likelihood of multiple rate cuts in 2024 due to a cooling inflation trend since its peak two summers ago. However, critics argue that Wall Street’s expectations for the number and timing of these cuts may have been excessive, leading to inflated stock prices and depressed Treasury yields since last autumn.
The yield on the 10-year Treasury rose to 4.14% from 4.11% late Wednesday, starting the week at 3.95%. The yield on the two-year Treasury, more sensitive to Fed action expectations, eased to 4.33% from 4.36%, with some hesitation.
Treasury yields fluctuated after a Thursday morning report showed the number of U.S. workers applying for unemployment benefits fell to its lowest level since two Septembers ago. This positive news for workers and the overall economy, which has defied recession predictions so far, raised the possibility of a stronger job market keeping upward pressure on inflation. This scenario could reduce the chances of the Federal Reserve cutting rates as early as its March meeting. Traders are now betting on a roughly 57% chance of that, down from over 70% a week ago, according to data from CME Group.
Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley, noted that the focus this week continues to be robust economic data and its impact on keeping rate cuts on hold for a while.
Other economic reports on Thursday presented a mixed picture. Manufacturing in the mid-Atlantic region contracted more than economists expected, while another report revealed that homebuilders broke ground on more projects last month than economists anticipated, albeit weaker than November’s level.
Stocks of homebuilders exhibited mixed reactions to the reports, with a 0.3% slip for D.R. Horton and a 3.7% climb for Beazer Homes.
On the losing end of Wall Street were several financial companies reporting weaker-than-expected results for the end of 2023. Discover Financial Services fell 10.3%, and KeyCorp lost 5.7%.
In stock markets abroad, indexes rose across much of Europe and Asia, helping to trim losses for the week so far.
