After an early climb, stocks have retraced their gains throughout Thursday's trading session. The major indices have retreated from their intraday highs and are now hovering near the break-even point.
As of the latest figures, the major indices have shown slight variations. The Nasdaq has slipped by 3.71 points, or less than 0.1%, to 16,738.68. The S&P 500 has edged up by 0.83 points, or less than 0.1%, to 5,308.98, while the Dow has risen by 20.80 points, or 0.1%, to 39,928.80.
The early market strength extended the rally from the previous session, buoyed by optimism over the future of interest rates following softer-than-anticipated consumer price inflation data.
A closely watched Labor Department report revealed that consumer prices increased less than expected in April, bolstering expectations that the Federal Reserve will cut interest rates in the coming months.
According to CME Group's FedWatch tool, there is an 87.5% probability of a quarter-point rate reduction by September.
The upward momentum earlier in the day led the key indices to new all-time highs, with the Dow briefly surpassing the 40,000 mark for the first time. However, buying interest has since dwindled as traders reassess the short-term market outlook.
In U.S. economic news, the Labor Department's report showed a decrease in initial jobless claims for the week ended May 11th. Initial claims dropped to 222,000, down 10,000 from the previous week's revised figure of 232,000. Economists had anticipated a decline to 220,000 from the previously reported 231,000.
The drop in jobless claims followed a spike to the highest level since late August 2023.
Separately, a Labor Department report indicated that U.S. import prices rose considerably more than expected in April. Import prices increased by 0.9% in April, following a revised 0.6% rise in March. Economists had expected a 0.3% increase compared to the originally reported 0.4% for March.
On a year-over-year basis, import prices grew by 1.1% in April, up from 0.4% in March, marking the largest annual increase since December 2022.
"The surge in April import prices is unlikely to boost the Fed's confidence in slowing inflation. However, officials are likely to place greater emphasis on yesterday's CPI report, which was a small step in the right direction and keeps a September rate cut, our baseline forecast, firmly on the table," said Matthew Martin, U.S. Economist at Oxford Economics.
Another report from the Fed revealed that U.S. industrial production remained flat in April. A rise in utilities output was offset by declines in mining and manufacturing. Industrial production was unchanged in April after a revised 0.1% increase in March. Economists had predicted a 0.1% rise compared to the previously reported 0.4%.
### Sector Performance
Reflecting the broader market's lackluster performance, most major sectors have shown only modest movements in afternoon trading.
However, housing stocks have experienced significant weakness, with the Philadelphia Housing Sector Index dropping by 1.9%. This follows a Commerce Department report that showed a rebound in housing starts in April but a continued decline in building permits.
Conversely, tobacco stocks have performed strongly, with the NYSE Arca Tobacco Index rising by 1.2%. Networking stocks have also gained, pushing the NYSE Arca Networking Index up by 1.1%, reaching its highest intraday level in over a month.
### International Markets
In overseas trading, Asia-Pacific stock markets mostly advanced on Thursday. Japan's Nikkei 225 Index surged by 1.4%, while Hong Kong's Hang Seng Index jumped by 1.6%.
Conversely, major European markets moved lower on the day. The U.K.'s FTSE 100 Index edged down by 0.1%, while France's CAC 40 Index and Germany's DAX Index fell by 0.6% and 0.7%, respectively.
In the bond market, treasuries have largely declined after initial gains. As a result, the yield on the benchmark ten-year note, which moves inversely to its price, has increased by 1.3 basis points to 4.369%.