U.S. Stocks Rally As Economic Data Eases Interest Rate Concerns

Following the mixed performance seen in the previous session, stocks moved sharply higher over the course of the trading day on Thursday. The Nasdaq and S&P 500 once again reached their best closing levels in over a year, while the Dow set to a six-month closing high.

The major averages pulled back off their highs of the session going into the close but held on to strong gains. The Dow shot up 428.73 points or 1.3 percent to 34,408.06, the Nasdaq jumped 156.34 points or 1.2 percent to 13,782.82 and the S&P 500 surged 53.25 points or 1.2 percent to 4,425.84.

The rally on Wall Street seemed to reflect optimism about the outlook for interest rates following the release of a slew of U.S. economic data.

While the Federal Reserve forecast further rate hikes on Wednesday, traders seem hopeful the central bank will not follow through.

The optimism partly stemmed from a report from the Labor Department showing initial jobless claims held at their highest level since October 2021 in the week ended June 9th.

The Labor Department said initial jobless claims came in at 262,000, unchanged from the previous week's revised level.

Economists had expected jobless claims to dip to 249,000 from the 261,000 originally reported for the previous week.

A separate Labor Department report showing import prices in the U.S. fell by much more than expected in the month of May has also generated optimism about the outlook for inflation.

The report said import prices slid by 0.6 percent in May, reflecting a sharp pullback in prices for fuel imports and a modest decrease in prices for non-fuel imports. Economists had expected import prices to edge down by 0.1 percent.

"Nonfuel import prices along with the consumer and producer prices suggest that inflation is moderating," said Matthew Martin, US Economist at Oxford Economics. "Therefore, it's unlikely that the Fed follows through with their plan to hike rates in the second half of this year."

Meanwhile, separate reports showed an unexpected increase in retail sales and an unexpected decrease in industrial production.

Sector News

Software stocks saw substantial strength on the day, with the Dow Jones U.S. Software Index surging by 2.7 percent to its best closing level in well over a year.

Considerable strength also emerged among interest-rate sensitive housing stocks, as reflected by the 1.7 percent jump by the Philadelphia Housing Sector Index. The index also reached a more than one-year closing high.

Transportation stocks also showed a significant move to the upside, driving the Dow Jones Transportation Average up by 1.6 percent to its best closing level in three months.

Financial, oil service and healthcare stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index edged down by 0.1 percent, while China's Shanghai Composite Index climbed by 0.7 percent.

The major European markets also finished the day mixed. While the U.K.'s FTSE 100 Index rose by 0.3 percent, the German DAX Index dipped by 0.1 percent and the French CAC 40 Index fell by 0.5 percent.

In the bond market, treasuries moved notably higher over the course of the session after seeing initial weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.8 basis points to 3.728 percent.

Looking Ahead

Following today's avalanche of data, the U.S. economic calendar is relatively quiet on Friday, although traders are still likely to keep an eye on a preliminary report on consumer sentiment in June.

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