To The Moon

Market Recap | Stocks Rise as Investors Weigh Central-Bank Moves

U.S. stocks moved higher Thursday as investors weighed the future path of interest rates following the Federal Reserve's quarter-point raise.

$S&P 500(.SPX)$ ticked up 0.3%, a day after the broad-market index lost 1.6%. $DJIA(.DJI)$  added 0.2%. $NASDAQ(.IXIC)$  rose 1%.

Fed Chair Jerome Powell on Wednesday said officials considered skipping a rate increase after stress in the banking sector intensified last week. The Fed's latest policy statement suggested the central bank thinks it may be done raising interest rates soon.

The major indexes initially rallied as Mr. Powell spoke, but gave up gains shortly after and closed near session lows. Some traders attributed the late-day selloff to comments from Treasury Secretary Janet Yellen, in which she said she wasn't considering ways to guarantee all bank deposits at a Senate hearing.

The rocky trading continued Thursday. Stocks rallied earlier in the day, but the rebound lost some steam in the final hour of trading.

"The mixed messaging between Powell and Yellen is unsettling investors," said Jeff Kilburg, founder and CEO of KKM Financial. "The market is grappling with the uncertainty."

Markets are experiencing a turbulent stretch of trading. The month has been dotted with eye-popping one-day moves in everything from regional bank shares to ultrasafe government bonds. The volatile trading highlights how investors have been contending with two economic realities.

On the one hand, inflation is still high and the Fed has said it is committed to combating it. Mr. Powell reiterated Wednesday that rate cuts later this year -- which many investors still expect -- aren't his "baseline expectation."

At the same time, a banking crisis continues to unfold in the U.S. This has exacerbated worries about a recession and led to turbulence for small regional banks.

Shares of such banks were among the biggest losers in the S&P 500 on Thursday. $First Republic Bank(FRC)$  's stock dropped 6.1%. $Comerica(CMA.US)$ shares shed 8.7%, while $M&T Bank(MTB.US)$ lost 4.5% in recent trading. 

The 10-year Treasury yield extended its drop, declining to 3.406%. Yields fall as bond prices rise.

Other havens, such as gold, also rallied. The most-actively traded gold futures contract jumped to $1993.80 a troy ounce, the highest settle value in a year.

Fresh data released early Thursday showed that workers filings for unemployment benefits held nearly steady last week, a sign that the broader labor market is robust despite large companies announcing layoffs.

Some investors and analysts are concerned the stress for regional banks will spread to other parts of the economy. Jefferies economists said they expected regional banks to tighten their credit standards when lending to small businesses, leading to layoffs in the weeks ahead.

"The strength of today's data is a reminder that our expected decline in labor market strength is starting off from an extremely strong position, and it will take time to play out," the economists wrote in a note to clients.

Tech stocks led the way Thursday. The S&P 500's information-technology sector added 1.6%, while the communication-services sector jumped 1.8%. Netflix was the biggest gainer in the broad stock-market gauge, adding 9%.

"When the 'Fed is done' trade kicks in, tech usually leads the charge," said R.J. Grant, head of equity trading at KBW.

In corporate news, Coinbase said the Securities and Exchange Commission plans to sue it for violating investor-protection laws. $Coinbase Global, Inc.(COIN)$  stock dropped 14%.

$Chewy(CHWY.US)$, the online pet-products retailer, reported a surprise drop in active customers from a year ago. Its shares fell 7.5%.

A string of other monetary authorities followed the Fed's lead, with central banks in Britain, Switzerland and Norway raising rates. The Bank of England's quarter-point rise was in line with market expectations after hot inflation data this week. The British pound strengthened after the BOE decision, appreciating 0.6% against the dollar. The STOXX Europe 600 Index eased 0.2%.

"It's not surprising, given the inflation print we had," said Jorge Garayo, a fixed-income strategist at Société Générale. Mr. Garayo said the BOE's tone about potential future hikes had hardened, too: "It is a little bit more hawkish, but that's to be expected," he said.

In Asia, Hong Kong's Hang Seng Index rose 2.3%, lifted by strong earnings from Tencent. The Shanghai Composite gained 0.6%, while the Nikkei 225 Index rose 0.2%.

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