US Stocks Rebound, Dollar And Treasury Yields Decline As Traders Reassess Fed Policy And Welcome House Approval Of Debt Ceiling Bill

The U.S. stock market rallied on Thursday, as traders revised down their expectations for a Fed rate rise in June, after more dovish-than-expected comments by Fed members in the past days.

According to Jefferson, the Fed is expected to keep interest rates steady in June in order to better assess the economic outlook. Harker, who is also a member of the FOMC, echoed his comments, adding, "I think we can take a bit of a skip for a meeting."

Meanwhile, investors welcomed the approval of the Fiscal Responsibility Act of 2023 by the House of Representatives by a vote of 314-117. The measure has been sent to the Senate and is quite likely to pass before the June 5 default date.

On the macro front, the labor market continues to show indications of tightness, with ADP reporting a 270,000 job rise in May, much above the projected 170,000, ahead of tomorrow's crucial nonfarm payroll data.
Cues From Thursday’s Trading:  The major averages were all in the green on Thursday, with small-cap and technology leading the way.
The Russell 2000 gained 1.2%, the Nasdaq 100 up 1.1%, the S&P 500 up 1%, and the Dow Jones Industrial Average up 0.8%.

Analyst Color: A June swoon may be in the cards for the broader U.S. equity market, said Adam Turnquist, chief technical strategist at LPL Financial.

While the S&P 500 continues to struggle with resistance at 4,200, overbought conditions have become widespread across the technology sector, he noted.

Turnquist said the tech sector, which has a 28% weighting in the S&P 500 Index, has been responsible for most of the index gains this year.

“While overbought conditions provide validation of the tech sector’s uptrend, and overbought does not mean over, probabilities for a temporary consolidation and/or pullback appear to be growing,” the analyst said.

If there is mean reversion, it would likely be toward the sector’s uptrend and provide a potential pullback opportunity for investors seeking a better entry point into tech, he added.

Thursday's Trading In Major U.S. Equity ETFs: In midday trading on Thursday, the SPDR S&P 500 ETF Trust SPY was 0.9% higher to $421.78, the SPDR Dow Jones Industrial Average ETF DIA rose 0.6% to $331.56 and the Invesco QQQ Trust QQQ was 1% higher to $351.65, according to Benzinga Pro data.

Almost all U.S. equity sectors were positive, except for the Utilities Select Sector SPDR Fund XLU, down 0.7%, and the Consumer Staples Select Sector SPDR Fund XLP, down 0.2%. 

The best performers of the day were the Energy Select Sector SPDR Fund XLE up 2.3% and the Materials Select Sector SPDR Fund XLB up 1.4%. 

Latest Economic Data: ADP reported an increase of 270,000 in private payrolls for May, well above what economists, on average, expected at 170,000.

The Labor Department reported an increase of 2,000 jobless claims to 232,000 for the week ended May 27, slightly below than the expected 235,000 estimate. 

The Institute of Supply Management revealed its monthly manufacturing PMI survey, which showed a dip from 47.1 to 46.9 in May, marginally below the expectation of 47. 

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Stocks In Focus:  Okta, Inc. OKTA and C3.ai, Inc. AI plunged about 20% in reaction to their respective earnings results.

• Salesforce, Inc. CRM was down 4.5% despite reporting strong quarterly results.
• Dollar General Corp. DG fell 19% after weaker-than-expected results. 
• NetApp, Inc. NTAP rose 9% following better-than-predicted earnings. 
• Chewy, Inc. CHWY skyrocketed 24% amid a massive earnings beat. 
• Pure Storage, Inc. PSTG gained 21% following its strong earnings. 
• Lucid Group, Inc. LCID plummeted 15% as investors saw the $3 billion equity offering from Saudi Arabia as watering down their interest in the troubled EV maker.
• Among those reporting after the close are Asana, Inc. ASAN, Broadcom, Inc. AVGO, Dell Technologies, Inc. DELL, lululemon Athletica, Inc. LULU, MongoDB MDB, SentinelOne, Inc. S, VMware VWM, Zscaler, Inc. ZS and Zumiez, Inc. (NASDAQ ZUMZ).

Commodities, Bonds, Other Global Equity Markets: Crude oil rocketed almost 5%, with a barrel of WTI-grade crude rising to $71. The United States Oil Fund ETF USO was 4.2% higher to $63 per share.  

Treasury yields fell, with the 10-year yield down by 3 basis points to 3.62% and the two-year yield down 5 basis points to 4.36%. The iShares 20+ Year Treasury Bond ETF TLT was 0.3% higher for the day. 

The dollar weakened, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, down 0.6%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.7% higher to 1.0760.

European equity indices rebounded. The SPDR DJ Euro STOXX 50 Etf  FEZ rose 1.4%. 

Gold gained 0.8% to $1,980/oz. The SPDR Gold Trust GLD was 0.8% higher to $183. Silver rose 1.6% to $23.84, with the iShares Silver Trust SLV up 1.4% to $21.90 per unit. Bitcoin BTC/USD fell 1.4% to $26,856.

Staff writer Piero Cingari updated this report midday Thursday.

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