Stocks Rally, Metals Gain As Dollar, Yields Fall: Soft Labor Market May Prompt Fed Pause

The stock market was fighting its way back on Thursday, with all the major averages trading in the green, after a higher-than-expected increase in unemployment claims last week confirmed market predictions that the Fed would opt for a pause in June.

Concurrently, the greenback fell on the back of declining U.S. Treasury yields, fueling a solid rally in precious metals, with gold and silver up 1.6% and 3.5%, respectively.

Traders currently assign a 72% probability that the Fed will keep interest rates unchanged at the FOMC meeting next week.

Cues From Thursday’s Trading:

The S&P 500 edged 0.5% higher, while the Dow Jones was up 0.3%. Tech outperformed, with the Nasdaq 100 Index up 1.4%, while the Russell 2000 index slipped 0.7%. 

Analyst Color:

LPL Financial chief equity strategist Jeffrey Buchbinder has a more muted outlook for the market. "With elevated recession risk, a rally through the high end of our year-end fair value target range on the S&P 500 at 4,400 seems unlikely in the near term," the analyst said.

“And with bonds offering some of the richest yields in decades, the risk-reward for stocks is no longer compelling, in our view,” he added.

Although not ruling out further upside from current levels, thanks to the strong momentum, the analyst said his fair value target range is likely a natural place for stocks to take a breather.

The analyst said he is neutral on equities.

Thursday's Trading In Major US Equity ETFs: In midday trading on Thursday, the SPDR S&P 500 ETF Trust SPY was 0.51% higher to $428.76, the SPDR Dow Jones Industrial Average ETF DIA rose 0.4% to $338.46 and the Invesco QQQ Trust QQQ was 1.3% higher to $353.37, according to Benzinga Pro data.

Among different sectors, the largest gainers were the Consumer Discretionary Select Sector SPDR Fund XLY, up 1.5%, and the Technology Select Sector SPDR Fund XLK up 1.2%. The weakest performers were the Real Estate Select Sector SPDR Fund XLRE and the Energy Select Sector SPDR Fund XLE, both down by 0.7%.

Latest Economic Data:

The Labor Department reported a higher-than-expected increase in weekly jobless claims for the week ending June 3, up from 233,000 to 261,000, and above the expected 235,000.

See also: How To Trade Futures

Stocks In Focus:

• GameStop Corp. GME plunged close to 18% after the company reported a first-quarter miss and fired its CEO.
• Smartsheet, Inc. SMAR and Oxford Industries, Inc. OXM slumped about 18% and 9%, respectively, following their quarterly results announcements.
• Warner Bros. Discovery, Inc. WBD rose 7%, after climbing 8.5% Wednesday, after talks with Amazon, Inc. AMZN about adding the ad-based tiers of Max to its Prime Video Channels offering.

• Rigetti Computing RGTI rose 21%, as its founder joined quantum technology-focused fund QDNL Participations as a partner,

• Carvana Co. CVNA surged more than 40% after the online used-car retailer said it expects improving profit metrics in the second quarter as cost-cutting measures take hold. 

• Commodities, Bonds, Other Global Equity Markets:

Crude oil fell 3%, with a barrel of WTI-grade crude falling to $70.25. The United States Oil Fund ETF USO was 3.1% lower to $62.70 per share.  

Treasury yields fell, with the 10-year yield down by 7 basis points to 3.73% and the two-year yield down 4 basis points to 4.51%. The iShares 20+ Year Treasury Bond ETF TLT jumped 0.9% lower for the day. 

The dollar fell, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, down 0.8%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.8% higher to 1.0784.

European equity indices ended mostly in the green. The SPDR DJ Euro STOXX 50 Etf  FEZ rose 1.2%. 

Gold gained 1.5% to $1,967/oz. The SPDR Gold Trust GLD was 1.5% higher at $182. Silver rallied 3.7% to $24.28, with the iShares Silver Trust SLV up 3.7% to $22.2 per unit. Bitcoin BTC/USD ticked up 0.7% to $26,554.

Staff writer Piero Cingari updated this report midday Thursday. 

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