U.S. stocks ended higher Thursday as investors assessed the Federal Reserve’s decision a day earlier to hike interest rates and signal a series of further increases to come.
Signs of increasing escalation in the Russia-Ukraine war and worries over the progress of negotiations were also in focus, while Moscow said it made coupon payments on a pair of dollar-denominated sovereign bonds.
How did stock indexes trade?
- The Dow Jones Industrial Average DJIA, +1.23% rose 417.66 points, or 1.2%, to close at 34,480.76, extending its winning streak to four sessions.
- The S&P 500 SPX, +1.23% gained 53.81 points, or 1.2%, to finish at 4,411.67, for its third straight daily gain.
- The Nasdaq Composite COMP, +1.33% advanced 178.23 points, or 1.3%, ending at 13,614.78, for a three-day winning streak.
Stocks rallied sharply Wednesday following the Fed decision, with the Dow finishing more than 500 points, or 1.6%, higher, while the S&P 500 advanced 2.2%. The Nasdaq Composite Index jumped 3.8%, for its best one-day percentage rise since Nov. 4, 2020.
What drove the markets?
Stocks were firmer Thursday after volatile trading this week as investors fretted about whether the economy is heading for a combination of stagnating growth and persistently high inflation in the wake of the pandemic and the war in Ukraine.
Russia’s war in Ukraine will disrupt commerce and clog up supply chains, slashing economic growth and pushing prices sharply higher around the globe, the Organization for Economic Cooperation and Development warned Thursday.
The Federal Reserve on Wednesday afternoon delivered an as-expected quarter-percentage point interest-rate rise and laid out a path for several more increases to come this year but Fed Chairman Jerome Powell also said the U.S. economy was strong enough to cope with higher oil prices and vowed not to let inflation get entrenched in the economy.
For stocks, the Fed decision effectively means “more of the same,” wrote Tom Essaye, founder of Sevens Report Research, in a note.
“Tactically long sectors with positive exposure to high inflation and high yields (commodities via DBC DBC, +4.80%, financials via XLF XLF, +1.25%, banks via KRE KRE, -1.08% /KBE KBE, -1.05%, financial services via IYG IYG, +0.77% ). Conversely, avoiding sectors with high multiples and high P/Es is still a valid strategy, although we expect to begin to see bifurcation in tech as the low-P/E, well-capitalized tech begins to act as a safe haven as investors begin to more aggressively price in slowing growth in the coming months,” he wrote.
From a technical perspective, the market is “in a weak trend with little momentum and not a deep oversold condition,” said Jeff deGraaf, chairman of Renaissance Macro Research, in a note.
“We see this as an expectations game where positioning was slightly offsides, and the removal of an important unknown (Fed) got people to jump,” he wrote, warning that the 4,550 level for the S&P 500 “will be difficult to get through.”
Analysts said reports that Russia had made $117 million coupon payments in dollars on a pair of dollar-denominated sovereign bonds helped lift sentiment. Failure to make payment in dollars would have put Moscow on track for a sovereign default after a 30-day grace period.
Oil prices were on the rise again Thursday, after three days of losses that had helped underpin equity markets. West Texas Intermediate crude CL00, +8.64% CL.1, +8.64% CLJ22, +8.64% jumped 8.4% to close at $102.98 a barrel. Energy stocks jumped as a result with Occidental Petroleum OXY, +9.47% up 9.5% after Berkshire Hathaway BRK.B, +2.64% revealed in a filing that it had upped its stake in the company.
And while hopes for negotiations over the war in Ukraine have been helping to drive recent gains for equities, the violence continued with Russia accused bombing of a drama theater in Mariupol on Wednesday that had been used as a shelter.
U.S. congressional leaders are preparing a range of economic sanctions that would strip Russia and its ally Belarus of permanent normalized trade status and could even take aim at China, given U.S. warnings against that country of supporting Moscow.
Stocks had also risen on Wednesday after the Chinese government said it would support its stock market and economy. The Bank of England, meanwhile, on Thursday raised its benchmark interest rates again.
Better-than-expected reports on the U.S. economy Thursday may also have helped stocks. First-time claims for unemployment benefits fell by 15,000 in the week ended March 12 to 214,000. U.S. housing starts rose 6.8% in February to an annual rate of 1.77 million, while the Philadelphia Fed’s regional factory index rose to 27.4 in March from 16 a month earlier. U.S. industrial production rose 0.5% in February.
Which companies were in focus?
- Shares of Dollar General Corp. DG, +4.45% rose 4.4% after providing an upbeat outlook for the coming fiscal year.
- Signet Jewelers Ltd. SIG, +6.97% reported fourth-quarter sales that beat expectations and raised its dividend. Shares saw a gain of 7%.
- Shares of Warby Parker Inc. WRBY, +3.28% ended 3.3% higher after the eyewear retailer reported a wider-than-expected fourth-quarter loss.
- Warren Buffett’s Berkshire Hathaway Inc. BRK.A, +2.86% BRKB, +2.26% boosted its common stock ownership position in Occidental Petroleum Corp. OXY, +9.47% to 136.37 million shares or 14.6% of the oil-and-gas company, according to a filing on Wednesday. Berkshire class A shares rose 2.9% after finishing Wednesday above $500,000 for the first time.
What did other assets do?
- The yield on the 10-year Treasury note TMUBMUSD10Y, 2.173% rose less than a basis point to 2.192%. Yields and debt prices move opposite each other.
- The ICE U.S. Dollar Index DXY, -0.63%, a measure of the currency against a basket of six major rivals, dropped 0.6%.
- Gold futures GC00, +1.50% snapped a four-day losing streak, rising 1.7%, to close at $1,940.90 an ounce.
- Bitcoin BTCUSD, -1.28% was down 0.6% to trade below $41,000.
- The Stoxx Europe 600 SXXP, +0.45% rose 0.5%, while London’s FTSE 100 UKX, +1.28% gained 1.3%.
- Hong Kong’s Hang Seng Index HSI, +7.04% jumped 7%, while the Shanghai Composite SHCOMP, +1.40% rose 1.4% and Japan’s Nikkei 225 NIK, +3.46% advanced 3.5%.
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