MW Nasdaq jumps 1.4%, S&P 500 nears 10-month high on economic data, hopes for Fed rate hike pause and progress on raising the debt ceiling
By Joseph Adinolfi and Jamie Chisholm
Senate's plans to vote on debt-ceiling bill encourage markets
U.S. stocks advanced on Thursday afternoon, as the Nasdaq Composite lead the way and the S&P 500 index neared its highest level in 10 months, with Congress making progress on raising the debt ceiling and support coming from economic data and some Federal Reserve officials who suggested there may be no need to raise interest rates again in June.
How are stocks trading
U.S. stocks wrapped up a historic month for markets on Wednesday as the Nasdaq Composite outperformed the Dow by the widest margin since October 2001
What's driving markets
After opening in the red Thursday morning, U.S. stock indexes leapt higher helped by a batch of economic reports on construction and manufacturing pointed to an ongoing slowdown in the industrial side of the American economy while the labor market remained healthy.
The S&P Global manufacturing PMI came in at 48.4 for May, down from 50.2 in April. Additionally, the May ISM manufacturing report showed a slowdown last month, with the gauge coming in at 46.9, down from 47.1. Construction spending, meanwhile, showed growth of 1.2% in April, following a revised gain of 0.3% during the prior month.
Robert Schein, chief investment officer at Blanke Schein Wealth Management said these data points are "material evidence" that the Fed's policy is having an impact on inflation, and inflation "seems to be moving in the right direction," Schein told MarketWatch via phone on Thursday.
In other economic data, the ADP private-sector employment data released Thursday at 8:15 a.m. Eastern showed that the U.S. added 278,000 in May, surpassing economists' expectations by nearly 100,000.
Meanwhile, the number of Americans who applied for unemployment benefits at the end of May edged up to a one-month high of 232,000, according to the latest weekly data. But still there were no signs of major layoffs.
"The economic data is hitting right in goldilocks land where it's not too hot, but certainly constructive," Art Hogan, chief market strategist at B. Riley Wealth, said during a phone interview with MarketWatch.
"We're in a sweet spot right now," Hogan added, explaining that the data are strong enough to assuage fears that the economy is sinking into recession, but not so strong as to pressure the Federal Reserve to deliver another interest-rate hike when its next two-day policy meeting concludes on June 14.
The data helped to reinforce the market's perception that the Fed will likely leave interest rates on hold when its upcoming two-day policy meeting concludes on June 14. Senior Fed officials have recently said they would prefer to skip raising interest rates in June with the caveat that the central bank could return to hiking rates later in the year. The Fed delivered its 10th consecutive rate hike after its May policy meeting, when it raised its policy-rate target by 25 basis points to 5.25%.
Investors were also applauding the debt-ceiling progress after the House of Representatives Wednesday night passed the Fiscal Responsibility Act, keeping the U.S. government on track to avoid a default by raising the federal government's legal borrowing capacity before June 5, the so-called "X date." Senators from both parties had previously pushed for amendments to the bill that would have required it to be sent back to the House for another vote, sparking concerns that the bill might hit a snag.
See: Debt-ceiling deal: Here's what's next as Senate prepares to vote
Investor attention now turns to the May employment data from the U.S. Labor Department due Friday. The U.S. is expected to add 180,000 jobs in May, down from 253,000 in the prior month, economists polled by the Wall Street Journal estimate. That would be the second-smallest increase this year.
Companies in focus
-- Jamie Chisholm contributed to this article.
-Joseph Adinolfi
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(END) Dow Jones Newswires
June 01, 2023 14:46 ET (18:46 GMT)
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