U.S. stocks were higher on Thursday, with technology stocks extending their gains in the final hour of trading, as optimism on artificial intelligence continued to drive semiconductor shares higher despite rising uncertainty about whether the Federal Reserve will cut interest rates as quickly as markets are expecting.
What’s happening
- The Dow Jones Industrial Average DJIA was up 175 points, or 0.4%, to 37,447.
- The S&P 500 SPX was up 37 points, or 0.7%, to 4,771.
- The Nasdaq Composite COMP was advancing 192 points, or 1.3%, to trade at 15,047, erasing its year-to-date losses to record positive gains of 0.3% for the year.
On Wednesday, Dow industrials fell 94 points, or 0.3%, while the S&P 500 and Nasdaq Composite each shed 0.6%, according to FactSet data.
What’s driving markets
U.S. stock indexes were giving back some of their losses from earlier in the week, with megacap technology stocks powering the large-cap benchmark S&P 500 and the tech-heavy Nasdaq Composite in Thursday afternoon trading, while Dow industrials were edging higher despite tumbling healthcare stocks.
Shares of Taiwan Semiconductor Manufacturing Co. TSM,
Meanwhile, BofA Securities analyst Wamsi Mohan weighed in with a newly upbeat view of Apple Inc.’s stock AAPL,
However, investors are still concerned that the Federal Reserve may not wind down its aggressive monetary tightening as quickly as the markets are expecting.
The last Fed meeting in December had markets increasingly expecting rate cuts to begin in March 2024. These expected cuts were also anticipated to be much deeper than what the central bank has forecast for the year.
See: Fed’s Bostic makes case for first rate cut in July-September quarter
However, those expectations are in doubt this week after strong December retail-sales data and after policy makers talked down expectations for an early start to rate cuts. Investors in both stock and bond markets are now speculating that the central bank will be in no rush to cut borrowing costs as the economy shows signs of resilience.
U.S. stocks have endured a choppy start to the year, with the S&P 500 pulling back from near-record highs. The 10-year Treasury yield BX:TMUBMUSD10Y has jumped more than 30 basis points to around 4.14% this week, according to FactSet data.
“The story this week continues to be robust economic data and how it may keep rate cuts on ice for a while,” said Chris Larkin, managing director for trading and investing at E-Trade from Morgan Stanley.
“Until we start to consistently see softer numbers, especially in the labor market, the Fed will likely stick to its higher-for-longer stance,” he said.
In U.S. economic data, the number of Americans who applied for first-time unemployment benefits last week fell by 187,000 to the lowest level in 16 months, indicating that layoffs remain near record lows. Economists had forecast new claims in the week ending Jan. 13 to total 208,000.
Meanwhile, the Philadelphia Fed said its gauge of regional business activity inched up to negative 10.6 in January from negative 12.8 in the prior month. Any reading below zero indicates deteriorating conditions.
Housing starts fell to a 1.46 million annual pace from 1.53 million in November, the government said Thursday. Economists had expected a rate of 1.43 million.
Jamie Chisholm contributed.
