U.S. stocks maintained their gains during Thursday's midday session.
Oil prices retreated from recent highs, while semiconductor stocks bounced back from recent selling pressure.
Market participants were monitoring the latest developments in U.S.-Iran tensions following new U.S. strikes.
The European Central Bank raised interest rates for the first time since 2023.
U.S. Producer Price Index data for May showed a 6.5% year-over-year increase, the highest in two and a half years.
The Dow Jones Industrial Average rose 372.48 points, or 0.75%, to 50,291.26.
The Nasdaq Composite gained 167.03 points, or 0.66%, to 25,336.53.
The S&P 500 index advanced 33.29 points, or 0.46%, to 7,300.28.
Key Market Movers
Chip stocks like Micron, AMD, and Intel rebounded, with the iShares Semiconductor ETF rising 3%.
This ETF had faced renewed pressure this week after plunging 10% last Friday, leading many investors to question whether the sector's parabolic rally had ended.
Bank of America upgraded Intel's rating from "underperform" to "buy" on Thursday, contributing to a significant surge in the stock's price.
The rebound in semiconductors coincided with heightened market anticipation for SpaceX's upcoming debut, which is seen as potentially highlighting the growth prospects associated with artificial intelligence infrastructure.
Some traders suggested the recent weakness in chip stocks might be due to investors selling holdings to make room for this massive IPO, which is reportedly targeting a valuation of up to $1.8 trillion.
While the broader tech sector rose, Oracle shares fell more than 9% after the software giant announced plans to raise an additional $20 billion in equity and debt to fund its AI infrastructure buildout.
West Texas Intermediate crude futures pulled back from overnight highs, trading down about 1%.
Geopolitical and Economic Context
According to a post on social media platform X by U.S. Central Command, its forces conducted further "defensive strikes" against Iran late Wednesday, which the post stated were carried out on the direction of the U.S. President.
The President stated on Thursday that the U.S. would take strong action against Iran, targeting Kharg Island and other key "oil infrastructure points."
During Wednesday's regular session, stocks declined amid renewed selling in the chip sector and escalating tensions with Iran.
The Dow plunged 953.33 points, or 1.87%, the S&P 500 fell 1.62%, and the tech-heavy Nasdaq Composite dropped 1.98%.
Victoria Fernandez, Chief Market Strategist at Crossmark Global Investments, noted that many investors are now buying assets they perceive as the opposite of the AI trade that has driven the stock market for much of this year.
"I think people are asking, where do we go to hedge the tech trade? What is the opposite of this momentum and beta?" she said, adding, "We are seeing a rotation out of tech and into sectors that have taken some hits over the past few months."
Fernandez added that she is seeing clients increasingly allocate funds to other areas like pharmaceuticals and biotech within healthcare, as well as to the financial and energy sectors.
Central Bank and Data Updates
Amid ongoing U.S.-Israel conflict with Iran and concerns about European inflation deviating from target levels, the European Central Bank announced a 25-basis-point rate hike on Thursday, bringing its key rate to 2.25%.
According to data from London Stock Exchange Group, markets had almost fully priced in at least a 25-basis-point hike ahead of the ECB's June policy meeting.
On the economic data front, the U.S. Producer Price Index for May rose 6.5% year-over-year, reaching a two-and-a-half-year high, primarily driven by surging energy prices.
Data released by the Bureau of Labor Statistics on Thursday showed the PPI increased 1.1% month-over-month, exceeding the expected 0.7%.
The 6.5% annual gain was the highest since November 2022, indicating building inflationary pressures at the wholesale level.
Core PPI, which excludes food and energy, rose 0.4% month-over-month, slightly below the expected 0.5%, suggesting fuel price increases were a primary driver of the current inflationary burden.
Further excluding food, energy, and trade services, the core PPI rose 0.8% month-over-month, the largest monthly increase since March 2022, and was up 5.1% year-over-year, the highest since October 2022.
Analysts noted that the current inflation picture may keep the U.S. Federal Reserve on hold for the foreseeable future.
The Fed's Federal Open Market Committee is scheduled to announce its latest policy decision next Wednesday, with market pricing indicating a near-100% probability of no change.
Traders currently see zero chance of a rate cut this year and over a 60% chance of another hike, most likely in December.
Earlier on Thursday, the European Central Bank voted to raise its benchmark rate by 25 basis points to curb soaring inflation.
In contrast, few Fed officials have expressed a similar tightening bias, with many advocating for a patient approach to see if energy supply shocks subside and whether inflation can return to its 2% target.
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