Stocks Continue To Climb, Dismissing Rate Hike Fears, While Dollar Tumbles On Hawkish ECB: What's Driving Markets Today?

Stocks rose the day after the Federal Reserve meeting, which resulted in a pause of interest rate hikes, as expected, although with a warning that additional tightening will be required, with the first rise possible as soon as July.

The European Central Bank (ECB) raised interest rates by 0.25%, hitting the highest levels in over two decades and signaling further increases in the future, causing the euro to surge 1% against the dollar.

The economic data released Thursday sent mixed signals, with unemployment claims rising more than expected to 262,000 last week, against the 249,000 predicted, and retail sales rising 0.3% in May versus the expected 0.1% dip.

Energy stocks outperformed: crude rose 3%, while natural gas jumped nearly 7% on smaller-than-expected stock build and expectations for increasing demand due to a potential heatwave in the coming weeks.

Cues From Thursday Trading

The Dow Jones added 350 points, rising 1% and outperforming all other major U.S. averages. The S&P 500 index rose 0.8%, while the tech-heavy Nasdaq 100 rose 0.4%. Small caps in the Russell 2000 index were broadly flat.

U.S. Indices’ Performance on Wednesday

Analyst Color:

“This current environment could be eerily similar to early 2007 when the Fed held a tightening bias on rates as they believed the housing market was stabilizing, the economy would continue to expand and inflation risks remained,” said LPL chief economist Jeffrey Roach.

“Clearly, those expectations were not met since we know what happened in later quarters. Investors should anticipate some volatility during these months where the economic outlook remains cloudy.”

Thursday’s Trading In Major US Equity ETFs

In midday trading on Thursday, the SPDR S&P 500 ETF Trust SPY was 0.9% higher to $440.92, the SPDR Dow Jones Industrial Average ETF DIA rose 1.1% to $344.30 and the Invesco QQQ Trust QQQ was 0.7% higher to $368.53, according to Benzinga Pro data.

Almost all U.S. equity sectors were positive, except for the Real Estate Select Sector SPDR Fund XLRE.

Both the Energy Select Sector SPDR Fund XLE and the Health Care Select Sector SPDR Fund XLV rose 1.3%, outperforming all other sectors. The Technology Select Sector SPDR Fund XLK gained 1%.

Latest Economic Data: What You Need To Know

• The Census Bureau reported a 0.3% monthly increase in retail sales, slightly lower than the 0.4% increase in April, but above the predicted 0.1% slump.
• The Labor Department reported 262,000 initial unemployment claims for the week ending June 10, flat from the previous week and above estimates of 249,000.
• The Philadelphia Federal Reserve's survey showed the business conditions index, rocketing from -10.3 in May to 12.7 in June and defying expectations of a 14-point slump. The manufacturing index based on the New York Fed's survey also jumped from -31.80 in May to 6.6 in June, well above the expected 15.1 slump.
• The Federal Reserve released its industrial production report for May showing a 0.2% monthly drop after a 0.5% surge in April, below estimates of a 0.1% month-over-month increase.

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Today’s Stock Movers

• Carvana Co. CVNA rose over 14% in a potential short squeeze.
• Nikola Corp. NKLA skyrocketed 36% in another potential short squeeze move, as the market’s short interest is about 20% of the outstanding shares.
• Antero Resources Corp. AR rallied 6.3% as natural gas moved higher.
• Domino’s Pizza, Inc. DPZ climbed 6% as the company was upgraded by Stifel.
• Mersana Therapeutics, Inc. MRSN plummeted 58%, as the Food and Drug Administration has put a partial clinical hold on new patient enrollment in its clinical trials UP-NEXT and UPGRADE-A for the ovarian cancer treatment pifitamab rilsodotin.
• T-Mobile US, Inc. TMUS rallied 4%, reacting to a bullish note from Morgan Stanley.
• Adobe Systems, Inc. ADBE is due to report after the close.

Commodities, Bonds, Other Global Equity Markets

Crude oil rose 2.5%, with a barrel of WTI-grade crude trading at $70.56. The United States Oil Fund ETF USO was 2.4% higher to $63.30.

Treasury yields fell, with the 10-year yield down by 7 basis points to 3.72% and the two-year yield down by 5 basis points to 4.64%. The iShares 20+ Year Treasury Bond ETF TLT was 1.2% higher 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 1% higher to 1.0940.

European equity traded higher across the board. The SPDR DJ Euro STOXX 50 Etf  FEZ rose 0.9%. 

Gold surged 0.9% to $1,959/oz. The SPDR Gold Trust GLD was 0.7% higher to $182. Silver fell 0.2% to $23.85/oz, with the iShares Silver Trust SLV down 0.3% to $21.9. Bitcoin BTC/USD fell 0.8 to $24,943.

Staff writer Piero Cingari updated this report midday Thursday. 

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