Before The Bell
Stocks regained some lost ground on Thursday after three days of selling, helped by positive economic news. The bounce back actually began during intraday trading on Wednesday, when the feeling seemed to be that the market had fallen too far, too fast.
At the close, the Dow Jones Industrial Average closed 188 points higher; the S&P 500 gained 43 points; and the NASDAQ was the star of the day, adding 236 points to turn in best performance on a percentage basis.
A better-than-expected reading on weekly initial jobless claims helped investors regroup. The number of new filings fell to its lowest point since the onset of the pandemic. The affirmative data was a reminder that there is lot to look forward to in the coming months, in terms of everyday life reverting to normal.
On the day, the technology sector led the way, with shares of consumer cyclical companies also faring well.
The energy sector lagged, though, as oil declined $1.31 a barrel in New York trading, to $62.05. There are increasing signs that more oil from Iran will reach the market in the not-too-distant future.
Despite the positives from the latest session, sentiment has turned a bit more bearish on the thinking that the Federal Reserve might be forced to raise interest rates ahead of schedule to deal with rising inflation.
The Fed’s easy-money policies have clearly provided strong support to stocks over the 15 or so months since the pandemic began. But the minutes from the central bank’s policy meeting late last month indicated that some of its officials were ready to begin a review of the Fed’s sizable monthly purchases of Treasury bonds and mortgage-backed securities.
The worry is that another “taper-tantrum” in which stocks sell off when the Fed slows its asset purchases could occur.
True, Fed chair Jerome Powell is likely to give plenty of warning prior to any policy changes. But investors seem to be sensing of a shift in tone to the market. Higher inflation, supply-chain snags, and difficulties in hiring workers for jobs that require interfacing with the public are some of the stumbling blocks being encountered by the bulls.
Even so, stocks seem likely to grind higher over time as long as the economy makes progress. The ride may well be choppier than in the past year, though, which has seen a 39% gain in the Dow Jones Industrial Average.
Stock futures are up moderately ahead of the opening bell.
– Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
