By Joy Wiltermuth and Joseph Adinolfi
U.S. stocks closed sharply higher on Thursday, led by consumer and technology stocks, after a batch of better earnings reports from retailers and mostly benign economic data helped assuage investor concerns about a slowing economy.
Federal Reserve minutes released Wednesday also stoked speculation about a pause to reassess interest rate hikes later in the year.
How did stocks trade?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +2.68% rose 516.91 points, or 1.6%, to end at 32,637.19.
S&P 500 /zigman2/quotes/210599714/realtime SPX +3.06% gained 79.11 points, or 2%, closing at 4,057.84.
Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +3.34% advanced 305.91 points, or 2.7% finishing at 11,75.
With its gains on Thursday, the Dow recorded its longest winning streak since March 18, according to Dow Jones Market Data.
What drove the markets?
U.S. stock indexes finished sharply higher, building on Wednesday’s gains, as minutes from the Fed’s latest meeting signaled that the central bank will monitor economic data for signs of weakness as it looks to head off high inflation.
While Fed officials still looked poised to pull the trigger on planned 50 basis-point interest rate hikes in June and July, as policy moves “expeditiously” toward the projected neutral rate of interest, analysts noted they also look concerned about avoiding a hard landing for the economy.
“Heading into the holiday weekend, it’s a nice reprieve to see things in the green,” said Northern Trust Wealth Management’s Kei Sasaki, a senior portfolio manager, by phone. “We think the markets, as well as investor sentiment, maybe had a bit of a sigh of relief,” Sasaki said, of the Fed minutes.
A view has emerged that after interest rate hikes this summer, the Fed could have more wiggle room to reassess its planned rate rises this year, particularly if economic growth shows signs of sputtering or the labor market starts to falter.
“This coincides with some of the things that have been facing investors, including anxiety as some retailers report lackluster results,” Sasaki said, adding that if consumer spending is slowing down, “that’s when recessionary fears kick in.”
As summer begins and the latest corporate earnings season draws to a close, there will be fewer negative catalysts to rattle markets.
“There’s a lack of scheduled negative news, although something negative could also come out of the blue,” said Mohannad Aama, a longtime markets strategist and professor at Rutgers University.
One potential risk on the horizon is Costco /zigman2/quotes/201191698/composite COST +1.97% , which is expected to report earnings after the close on Thursday. Recent reports from rival retailers like Target /zigman2/quotes/207799045/composite TGT +2.46% and Walmart /zigman2/quotes/207374728/composite WMT +0.08% rattled markets earlier this month.
However, investors did see some strong news from retailers Thursday as Dollar Tree /zigman2/quotes/203712248/composite DLTR +1.09% , Dollar General /zigman2/quotes/200691429/composite DG +1.76% and Macy’s /zigman2/quotes/201854387/composite M +9.91% stocks rocketed higher — their shares climbed 21.9%, 13.7% and 19.3% respectively — breaking a trend of softening guidance among prominent retailers.