Stocks showed modest strength on Thursday, extending the rally observed in the previous session. The major indices have reached new record highs, with the Dow surpassing the 40,000 mark for the first time.
Currently, the indices have pulled back slightly from their peak but remain positive. The Dow is up 77.98 points, or 0.2 percent, at 39,985.98. The Nasdaq has risen 25.03 points, or 0.2 percent, to 16,767.42, and the S&P 500 has increased by 8.52 points, or 0.2 percent, to 5,316.67.
The modest gains on Wall Street reflect ongoing optimism about interest rates following tamer-than-expected consumer price inflation data released on Wednesday.
The Labor Department’s closely watched report indicated that consumer prices rose less than expected in April, reinforcing expectations that the Federal Reserve may lower interest rates in the coming months.
According to CME Group's FedWatch tool, there is an 89.5 percent probability that interest rates will be a quarter point lower by September.
Adding to the interest rate optimism, the Labor Department reported a decline in initial jobless claims for the week ending May 11th.
Initial jobless claims dropped to 222,000, down 10,000 from the previous week’s revised level of 232,000.
Economists had projected jobless claims to fall to 220,000 from the originally reported 231,000 for the preceding week.
This pullback follows a rise in jobless claims to their highest level since August 26, 2023, in the prior week.
Meanwhile, traders have largely ignored a separate Labor Department report indicating a significant increase in U.S. import prices in April.
The report stated that import prices surged by 0.9 percent in April, following a revised increase of 0.6 percent in March.
Economists had only expected import prices to rise by 0.3 percent compared to the initially reported 0.4 percent increase for the previous month.
On an annual basis, import prices accelerated to a 1.1 percent increase in April from 0.4 percent in March, marking the largest year-over-year rise since December 2022.
"The surge in April import prices won't instill the Fed with greater confidence that inflation is decelerating. However, officials will likely focus more on yesterday's CPI report, which was a small step in the right direction and supports a rate cut in September, our baseline forecast," said Matthew Martin, U.S. Economist at Oxford Economics.
Additionally, a report from the Federal Reserve showed that U.S. industrial production remained flat in April. Although there was a surge in utilities output, it was offset by declines in mining and manufacturing output.
The Fed reported that industrial production remained unchanged in April, following a downwardly revised 0.1 percent increase in March.
Economists had expected industrial production to edge up by 0.1 percent, compared to the initially reported 0.4 percent increase for the previous month.
Sector NewsIn spite of the broader market’s modest strength, housing stocks have declined significantly, pulling the Philadelphia Housing Sector Index down by 1.7 percent.
This decline follows a Commerce Department report showing a rebound in housing starts for April but a continued slump in building permits.
Airline stocks also showed notable weakness, as evidenced by the 1.2 percent loss in the NYSE Arca Airline Index.
Conversely, tobacco stocks experienced strong gains, driving the NYSE Arca Tobacco Index up by 1.1 percent.
Other MarketsIn overseas markets, stocks in the Asia-Pacific region moved mostly higher on Thursday. Japan’s Nikkei 225 Index gained 1.4 percent, while Hong Kong’s Hang Seng Index surged by 1.6 percent.
However, European markets moved downwards. The U.K.’s FTSE 100 Index edged down by 0.1 percent, while France’s CAC 40 Index and Germany’s DAX Index both fell by 0.6 percent.
In the bond market, treasuries pulled back near the unchanged line after initial strength. Consequently, the yield on the benchmark ten-year note remains unchanged at 4.356 percent.