Dow ends up nearly 200 points, stocks snap 3-day skid on brighter economic data

What drove the market?

U.S. stocks closed higher, ending a three-session skid, as mostly upbeat round of economic data provided a backdrop for gains.

First-time applications for U.S. unemployment benefits fell to a pandemic low last week, the government reported Thursday. Initial jobless claims fell 34,000 to 444,000 in the week ended May 15. Economists surveyed by Dow Jones and The Wall Street Journal had forecast new claims to fall to a seasonally adjusted 452,000.

Meanwhile, the Conference Board Leading Economic Index saw a second consecutive solid gain in April, a sign the economy’s recovery from the pandemic is gathering momentum. Separately, a Philadelphia Fed gauge of regional factory activity declined in May, pulling back from a 50-year high in April.

The gains reversed a weaker tone across equity markets after a broad-based, global selloff on Wednesday that spread across assets viewed as risky, including equities, commodities and cryptocurrencies.

Recent pressure on stocks has been attributed to concerns about lofty stock valuations, uncertainties about the degree to which the recovery will boost inflation, and worries about froth building in parts of the financial system.

Against that backdrop, turbulence has become a bigger feature of the market as investors parse key data points and comments from the Fed for clarity on the outlook for the economy and markets.

“Our view is that each of the factors pushing the markets lower has been (or will prove) temporary,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note.

UBS expects spillovers from the crypto market to be limited, while inflation pressures are likely to prove transitory, he said, adding that global progress in curbing the pandemic remains an encouraging factor.

“Since we believe the equity rally has further to run, we advise investors to use elevated volatility to build long-term exposure,” he wrote.

Market participants were still digesting Fed minutes from Wednesday, which showed that “a number of participants suggested that if the economy continued to make rapid progress toward the Committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.”

Read: Fed takes baby step toward scaling back its bond purchases

Most Fed members have said that the economy hasn’t made substantial progress toward its goal of a healthy and vibrant labor market to merit a removal of accommodation, but talk of tapering has historically been a boogeyman for risk-taking.

“We believe the Fed intends to be patient and keep rates lower for longer, but by the end of this year the unanimous desire of the committee to keep rates low may dissipate and more disagreement may spill out into the public eye,” said Chris Zacarelli, chief investment officer for Independent Advisor Alliance, in emailed comments.

“In the meantime, cyclicals should have room to run and the growth versus value debate will rage on, while we wait for the Fed to change its collective mind on rates,” he said.

Bitcoin almost entirely reversed it $10,000 U-turn on Wednesday, hitting a low around $30,000 only to return to a price around $40,000, amid a wild selloff for the world’s No. 1 digital asset. Bitcoin was up 2.8%, at last check Thursday, above $40,400.

Other sectors were still experiencing turbulence, including transportation and banking stocks.

“It’s kind of a no man’s land for the market,” said Michael Antonelli, market strategist at Baird. “Economic data is starting to turn over but from “some of the best all-time” levels, but vaccinations have slowed and seasonality is starting to be a headwind.”

“The re-open is stuck in the mud with supply chain and labor issues. So we tread water a bit, rotation dominates as we look for better sector performance,” he said.

Which companies were in focus?

• Oatly Group AB
  OTLY,
  +18.82%
  ADRs soared out of the gate as it made its trading debut Thursday, opening at $22.12, 30.1% higher than the IPO price of $17. Shares gained 18.8%.
• Cisco Systems Inc.
  CSCO,
  +0.72%
  shares advanced 0.7%, after the company delivered an earnings outlook late Wednesday that fell short of Wall Street expectations because of higher costs from suppliers amid a global semiconductor shortage.
• Shares of Lithia Motors Inc. LAD rose 2.7%, after shaking off premarket weakness after the auto retailer announced the pricing of its $1 billion stock offering and upsized debt offering.
• Hormel Foods Corp. HRL reported Thursday fiscal second-quarter profit and sales that topped expectations, and raised its full-year outlook, even as volumes declined. Shares jumped 7.4%.
• Pfizer Inc. PFE and German partner BioNTech SE BNTX said Thursday they have reached a new agreement with the European Commission to supply up to 1.8 billion additional doses of their COVID-19 vaccine. Pfizer shares rose 0.7%, while BioNTech’s American depositary receipts jumped 2.3%.
• Ralph Lauren Corp.
  RL,
  -7.00%
  delivered results Thursday morning that blew past earnings estimates for its fiscal fourth quarter, and said it may close more stores in fiscal 2022. Shares closed down 7%.

What did other markets do?

• The yield on the 10-year Treasury note
  TMUBMUSD10Y,
  1.624%
  fell 4.9 basis points to 1.631%. Yields and bond prices move in opposite directions.
• The ICE U.S. Dollar Index
  DXY,
  -0.48%,
  a gauge of the currency against a basket of six major rivals, fell 0.5%.
• Oil futures closed lower, with the U.S. benchmark
  CL00,
  -2.42%
  down 2.1% settling at $62.05 a barrel. Gold futures
  GC00,
  -0.22%
  added 40 cents to settle at 1,881.90 an ounce.
• The Stoxx Europe 600 index
  SXXP,
  +1.27%
  rose 1.3%, while London’s FTSE 100
  UKX,
  +1.00%
  gained 1%.
• Hong Kong’s Hang Seng Index
  HSI,
  -0.50%
  fell 0.5%, while the Shanghai Composite
  SHCOMP,
  -0.11%
  gave up 0.1% and Japan’s Nikkei 225
  NIK,
  +0.19%
  rose 0.2%.

Mark DeCambre contributed reporting