US Stocks Mixed, Tech Steady, While Dollar Rallies on Hawkish Powell Remarks: What's Driving Markets Thursday

Stocks are mixed on Thursday on the heels of Wednesday’s negative session as traders assess Jerome Powell‘s remarks before a Senate committee.

The Fed chair stuck to the message delivered the day before to the House Financial Services Committee, stating that two further interest rate increases might be warranted if the economy performs as expected.

Traders upped their expectation on a 25-basis-point hike in July from 72% prior to Powell’s testimony to 77%.

On the macro front, weekly jobless claims came in higher than expected for the third week in a row, potentially indicating a softening in the labor market.

Cues From Thursday's Trading:

The S&P 500 Index held steady at 4,370 levels, flat for the session. The Dow 30 was slightly down by 0.1%, while small caps in the Russell 2000 fell 0.7%, underperforming the other major averages.

Tech attempted a slight rebound, with the Nasdaq 100 Index up 0.6%.

U.S. Indices’ Performance on Thursday

Analyst Color:

The stock market appears to doubt the Fed’s resolve to further raise interest rates and investors are staying on the sidelines, sending valuations higher, said Morgan Stanley's Lisa Shalett.

“Excitement about recent technological innovations and a fear of missing out on the stock market's gains have only further fueled its rally,” she said.

Shalett said she is skeptical of the rally continuing and cautioned investors to start heeding the Fed's signals. Morgan Stanley is of the view the Fed is unlikely to risk its own credibility by shopping short of fully quashing inflation. Core inflation remained sticky despite the easing seen in broader measures of inflation, the firm said.

Thursday’s Trading In Major US Equity ETFs: In midday trading on Thursday, the SPDR S&P 500 ETF Trust SPY was 0.1% higher to $435, the SPDR Dow Jones Industrial Average ETF DIA eased 0.1% to $339 and the Invesco QQQ Trust QQQ was 0.7% higher to $364, according to Benzinga Pro data.

The Real Estate Select Sector SPDR Fund XLRE underperformed, down 1.6%, followed by the Energy Select Sector SPDR Fund XLE, down 1.2%.

Wednesday’s losers attempted a comeback, with the Consumer Discretionary Select Sector SPDR Fund XLY and the Technology Select Sector SPDR Fund XLK, up 1% and 0.4% respectively.

Latest Economic Data:

The Chicago Fed National Activity Index dropped from an upwardly revised 0.14 in April to -0.15 in May 2023.

Existing home sales increased 2.3% from the previous month to a seasonally adjusted annual rate of 4.3 million in May 2023, exceeding market expectations of 4.25 million.

Fed Governor Michelle Bowman remarked that additional hikes are needed to curb inflation.

The Energy Information Administration released a higher-than-predicted drop in petroleum inventories last week. U.S. crude oil inventories plummeted by 3.831 million barrels, compared with market expectations of a 0.329 million increase.

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Stocks In Focus:

• FedEx Corp. FDX rallied 3.5%, fully erasing yesterday’s 2.5% drop.
• Amazon Inc. AMZN rose 3.7% as AWS announced investments to foster machine learning and artificial intelligence.
• Ford Motor Company F rose 1.9% after receiving a record $9.2-billion government loan for battery plants.
• Spirit Aerosystems Holdings, Inc. SPR fell over 8% after the company said it is suspending factory production prior to the expiration of the contract for employees represented by the International Association of Machinists and Aerospace Workers. This follows the decision by the union to begin a strike on Saturday.
• Tesla, Inc. TSLA was up by 0.7%, despite Morgan Stanley downgrading the company from Overweight to Neutral.
• Other EV makers such as Lucid Group, Inc. LCID fell 4.1%.
• Sotera Health SHC jumped 18% after announcing the completion of the January 2023 settlement program for ethylene oxide claims against its Sterigenics unit in Illinois.
• Smith & Wesson Brands, Inc. SWBI is due to report earnings after the market close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil plummeted 4.2%, with a barrel of WTI-grade crude dropping to $69.24. The United States Oil Fund ETF USO was 4% lower to $62.34 per share.  

Treasury yields rose, with the 10-year yield up by 7 basis points to 3.8% and the two-year yield up by 6 basis points to 4.78%. The iShares 20+ Year Treasury Bond ETF TLT was 1% lower for the day. 

The dollar rose, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, down 0.4%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.3% lower to 1.0860.

European equity traded lower across the board. The SPDR DJ Euro STOXX 50 Etf  FEZ fell 0.6%. 

Gold fell 0.8% to $1,916/oz. The SPDR Gold Trust GLD was 0.8% lower to $178. Silver fell 0.7% to $22.5, with the iShares Silver Trust SLV down 1% to $20.65. Bitcoin BTC/USD eased 0.2% to $29,940.

Staff writer Piero Cingari updated this report midday Thursday. 

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