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U.S. stocks pushed higher Thursday as investors weighed minutes from the Federal Reserve’s last meeting and fresh employment data out of Washington.
The S&P 500 rallied 1.2% and the Nasdaq gained 1.9% as of 12:30 p.m. ET. The Dow Jones Industrial Average added 280 points, or roughly 0.9%.
Initial jobless claims unexpectedly edged higher last week in a potential sign the labor market may be cooling amid tighter financial conditions. First-time filings for unemployment insurance in the U.S. totaled 235,000 for the week ended July 2, increasing by 4,000 from the prior week’s reading of 231,000 claims, the Department of Labor said Thursday. Economists surveyed by Bloomberg had expected the latest reading to come in at 230,000.
“The data are (finally) moving in the Fed’s direction. It’s never a good thing to see layoffs, but the pressure on wages may have now peaked,” Harris Financial Group Managing Partner Jamie Cox said. “A few more weeks of these types of numbers and maybe, just maybe, financial conditions are tight enough to allow the Fed to throttle back on the scale of rate increases.”
The print comes ahead of the government’s monthly employment report for June due out Friday.
Elsewhere in markets, Bed Bath & Beyond stock (BBBY) surged more than 20% in early trading following news that the interim CEO bought stock and GameStop stock (GME) rose 9% after the video game retailer and meme-stock darling announced late Wednesday that its board approved a four-for-one stock split in the form of a dividend.
Tesla (TSLA), Amazon (AMZN), and Shopify (SHOP) also recently announced stock splits, which increase the number of a company’s shares to give more investors access for purchasing without changing the market capitalization.
Crude oil (CL=F) rose back above $102 per barrel after falling below $100 for the first time since mid-May on Tuesday. The benchmark 10-year yield Treasury held at 2.9% following a slide from its recent decade high of over 3.4% in the middle of June.
Thursday’s early gains follow three straight up days for the S&P 500 index. In the previous session, the benchmark closed up 0.4% – along with slight increases for the Dow and Nasdaq – after a readout of minutes from the Federal Reserve’s June 14-15 meeting affirmed the U.S. central bank was committed to intervening as needed to rein in inflation.
“Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist,” meeting minutes stated.
Officials also discussed concerns over inflation becoming entrenched in the U.S. economy and price stability becoming increasingly difficult to restore.
“Many participants judged that a significant risk now facing the Committee was that elevated inflation could become entrenched if the public began to question the resolve of the Committee to adjust the stance of policy as warranted,” the minutes stated.
At the same time, concerns remain that a further ramp in interest rates to tame inflation may push the economy into recession, particularly as key economic data including consumer sentiment and spending, along with recent purchasing managers’ indices, have shown signs of softening in the latest prints. The Atlanta Federal Reserve’s GDPNow model now estimates real GDP growth in the second quarter of 2022 at -2.1%, which would meet the unofficial threshold for a recession when matched with the 1.6% decline in Q1. The official read on second quarter GDP is due July 28.
The Federal Reserve is “nervous that they might raise rates too fast and start a recession,” University of Chicago’s Booth School of Business Economics Professor Austan Goolsbee told Yahoo Finance Live on Wednesday. “That’s the tough balancing act the Fed has got made tougher by the fact that this business cycle looks nothing like a normal business cycle.”
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