U.S. stock benchmarks lost altitude late-Thursday morning, retreating from an early advance in the latest example of steep intraday swings on Wall Street.
The decline threatened to end a five-day winning streak for the major indexes, though positive news came in the latest data on inflation and the labor market, which pointed to an economy that was growing but in little immediate danger of overheating, while strong results at Cisco Systems underlined how American corporations continues to fare well in the current environment.
What are the main benchmarks doing?
The Dow Jones Industrial Average DJIA, +0.27% rose 23 points, or 0.1%, to 24,902, having previously risen as high as 0.9% at about 25,120. The S&P 500 SPX, +0.25% added 1 point to 2,699, a rise of less than 0.1%. The Nasdaq Composite Index COMP, +0.57% was up 27 points to 7,170, a gain of 0.%.
So far this week, the Dow is up 3% and on track for its biggest weekly percentage rise since around December. The S&P has climbed 3.1% and is set for its best week since December 2016. The Nasdaq is up 4.3%, which represents its best week since July 2015.
Those gains come after sharp losses seen earlier this month, which pushed the Dow and S&P into correction territory, or a 10% drop from a peak. The three gauges stand between 4.7% and 6.6% below last month’s all-time highs. The selloff was sparked in part by rising bond yields amid signs of an uptick in inflation, with the higher yields luring money out of equities. Strategists have said the selloff was overdue, but it became overdone.
What are strategists saying?
“This is a year of recalibration. In January we recalibrated to higher earnings, and now we’re doing it for higher bond yields, which have been led by potentially higher inflation,” said Leo Grohowski, chief investment officer of BNY Mellon Wealth Management. “Market participants are correctly focusing on inflation, because a rise in inflation can preface an economic slowdown, or an increase in interest rates that could lead to one.”
Grohowski remains optimistic about the market, noting that his firm’s year-end target for the S&P 500 was 2,850. However, he expects the recent volatility to persist as investors struggle between the prospect of higher rates on one hand, and strong fundamentals on the other.
“This tug of war will be with us for the year, but I think the market is becoming more comfortable with the idea that a little bit of inflation will be OK,” said Grohowski, who helps oversee $238 billion in total client assets.
What could help drive markets?
In the latest economic data, initial jobless claims rose by 7,000 to 230,000 in the latest week, as had been expected, but claims remain near multidecade lows. Separately, wholesale prices rose 0.4% in January, led by a rise in oil prices, though core producer prices were also up by 0.4%. The figure was the latest view on inflation, following Wednesday’s consumer-price index.
Two gauges of manufacturing sentiment underscored solid growth in February. The Philadelphia Fed manufacturing index rose to a reading of 25.8 in February from 22.2 in January. Economists had expected a slight retreat to 21. The Empire State Index, meanwhile slowed to a reading of 13.1 in February from 17.7 in January, the New York Fed said. While the Empire State index was well above the level indicating improving conditions, this was a weaker reading than had been anticipated, and it represented the fourth straight monthly rise.
Mortgage rates have climbed to the highest level in close to four years, according to data released Thursday.
What are other assets doing?
European stocks SXXP, +0.41% were scoring gains, while Asian markets closed sharply higher, though volumes in much of the region were capped by the coming Lunar New Year holiday. Some Asian markets were closed Thursday for the holiday.
Which stocks look like key movers?
Shares in Cisco Systems Inc. CSCO, +3.22% jumped 3.5% for the biggest gain among Dow components. The tech giant’s earnings and outlook topped Wall Street estimates late Wednesday, and the company also showed revenue growth for the first time in more than a year and a half. The stock has gained more than 13% thus far this year, making it the second-best performer among Dow stocks, behind Boeing Co. BA, +2.30%
Shares in McDonald’s Inc. MCD, -0.25% fell 0.5% after the fast-food heavyweight announced a fresh world-wide push to make its Happy Meal offerings healthier, including taking away the cheeseburger as an entree choice in the U.S. “The cheeseburger will only be available at a customer’s request,” the company said in a news release.
Shares in Avon Products Inc. AVP, +5.95% jumped 6.4% after the beauty-products seller posted adjusted quarterly earnings that beat forecasts, but revenue that missed expectations.
Antares Pharma Inc. ATRS, +9.09% jumped 8.18% while Amag Pharmaceuticals Inc. AMAG, +29.14% climbed 27% after Amag said the U.S. Food and Drug Administration has approved their Makena subcutaneous auto injector drug-device combination product.
Energy stocks were the biggest losers on the day, with the sector off 1.7%, by far the biggest decliner among the 11 primary S&P 500 sectors. The industry extended its recent underperformance; it is down 7.1% over the past 12 months, which also makes for the worst performance by any S&P sector over that period.
Crude-oil prices weighed on the sector on Thursday, with crude down 1.1% and Brent crude off 1.5%. Oil and gas equipment and services companies saw particular downside on the day.