By William Watts and Barbara Kollmeyer
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 /zigman2/quotes/210598065/realtime DJIA +1.05% rose 417.66 points, or 1.2%, to close at 34,480.76, extending its winning streak to four sessions.
The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.06% gained 53.81 points, or 1.2%, to finish at 4,411.67, for its third straight daily gain and the largest three day percentage gain since Thursday, November 5, 2020.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.90% advanced 178.23 points, or 1.3%, ending at 13,614.78, for a three-day winning streak and the largest three day percentage gain since Thursday, November 5, 2020.
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 extended a recovery 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.
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.
“A wrath of positive US economic data vindicated Fed Chair Powell’s optimistic view of the economy,” said Edward Moya, Senior Market Analyst for the Americas at OANDA.
However, 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 (the Fed) got people to jump,” he wrote, warning that the 4,550 level for the S&P 500 “will be difficult to get through.”
Reports that Russia had made $117 million coupon payments in dollars on a pair of dollar-denominated sovereign bonds helped lift sentiment too, analysts said. Failure to make payment in dollars would have put Moscow on track for a sovereign default after a 30-day grace period which means the Russia has avoided its first default on foreign debt since the 1917 Bolshevik Revolution, Moya noted.
Oil prices were also on the rise again Thursday, after three days of losses that had helped underpin equity markets. West Texas Intermediate crude /zigman2/quotes/209723049/delayed CL00 +2.55% /zigman2/quotes/211629951/delayed CL.1 +2.55% jumped 8.4% to close at $102.98 a barrel. Energy stocks jumped as a result with Occidental Petroleum /zigman2/quotes/207018272/composite OXY +2.65% up 9.5% after Berkshire Hathaway /zigman2/quotes/200060694/composite BRK.B +1.64% revealed in a filing that it had upped its stake in the company.