Stock indexes were mixed on Thursday after data on rising prices from producers at a slower-than-expected pace in December. Investors also parsed the latest jobless claims data and joined Congressional testimony from Federal Reserve Governor Lyle Brainard. The start of the fourth quarter earnings season is on the market.
The Dow Jones Industrial Average was up 124 points, or 0.3%, on Thursday morning, while the S&P 500 lost less than 0.1% and the Nasdaq Composite lost 0.3%.
The latest weekly unemployment insurance claims data on Thursday showed continued progress in the recovery in the US labor market. Initial jobless claims were 230,000, slightly above the consensus and up from 207,000 a week earlier. Meanwhile, continuing claims declined from 1.75 million to 1.56 million. According to FactSet, economists were predicting an average of 1.76 million sustained claims.
Inflation – and the measure of the Federal Reserve’s willingness to rein in it – has been a driving force in the market recently, especially after the December consumer-price index hit its highest level since 1982.
In that regard, the December producer-price index released on Thursday morning has helped ease some concerns. It rose only 0.2% in November to December, well below the 0.4% growth forecast, a sign that the pace of inflation may be slowing. Producer prices often lead consumer prices.
December’s increase still brings the year-over-year increase in the Producer Price Index to 9.7%, the highest in the history of the data series. The change in producer prices in November was revised upwards to 0.7%, up from 0.8% reported a month earlier.
Investors had already brushed off Wednesday’s CPI, as the stock rose slightly on the back of the data as markets looked bullish. Inflation is seen nearing its peak and investors were worried about too much print.
“Tomorrow’s market reaction could raise expectations that perhaps global inflationary pressures may begin to ease,” said Michael Hewson, an analyst at broker CMC Markets.
“This seems a bit premature on a one-month number basis, although this afternoon’s US PPI may add an extra quiver to that argument if we see a similar trend in today’s December data,” he said. “PPI has become a leading indicator for headline CPI for much of the past year, and is already well above CPI levels.”
The Fed’s Lyle Brainard testifies before the Senate Banking Committee on Thursday morning at a nomination hearing as the central bank’s next vice president. Investors may be hearing clues about the central bank’s response to inflation. Brainard said on Wednesday that inflation was “very high” and reducing it would be a priority.
Latest signs from Fed officials show central bank on track First, the faster the interest rate rises, with the market now increasing three rates this year and the first in March. Tighter policy ahead, and an upbeat Fed tone on the strength of the US economy have seen bond yields rise in early 2022, putting pressure on stocks.
The trend resumed on Thursday, with the 10-year yield rising slightly to around 1.74%.
Next quarter will be earnings season for stock market investors, as JPMorgan Chase (ticker: JPM), Wells Fargo (WFC), and Citigroup (C) all reported on Friday morning.
“Perhaps the earnings season after a period of fear, relief and speculation will bring some welcome normality to the markets,” wrote Craig Erlam, senior market analyst for the UK and EMEA at currency broker OANDA. “The fourth quarter is expected to be another strong quarter, although the emergence of Omicron is likely to have an impact during the critical holiday period for many companies. Of course, as we’ve seen throughout the pandemic, it probably would have been for the benefit of others.”
Wall Street’s consensus fourth-quarter S&P 500 earnings per share rose 20.3% year-over-year, according to data from Credit Suisse strategist Jonathan Golub. The fastest growth in the index is expected to come from more cyclical sectors, such as energy, materials and industry.
In the commodity space, crude oil prices continued their steady rise, with the futures contract for international oil benchmark Brent rising 0.2% to close to $85 a barrel. US futures for West Texas Intermediate crude were similarly trading at around $83.
The cryptocurrency was on the upswing again on Thursday, with bitcoin—the dominant crypto—up nearly 1% over the past 24 hours to nearly $44,000, according to data from CoinDesk. Shorter peer Ethereum was flat near $3,375.
Here are eight stocks trending Thursday:
Chip conglomerate Taiwan Semiconductor Manufacturing Company (TSM) rose 8.5% after posting strong quarterly results. The world’s largest contract semiconductor maker saw a 16.4% jump in net profit on a 21.2% rise in sales amid strong demand and tight supply.
Delta Air Lines (DAL) gained 3.9% after reporting better-than-expected earnings and revenue. Management’s comments regarding spring and summer travel demand took on an optimistic and upbeat tone.
KB Home (KBH) stock jumped 14% after fourth-quarter profit estimates and 2022 guidance impressed analysts.
Virgin Galactic (SPCE) stock fell 15% after the space tourism company said it plans to raise up to $500 million through the sale of convertible senior notes. It also reported early fourth quarter free cash flow.
Snap (SNAP) stock fell 6% after Cowen analysts downgraded the stock from equal to hold, to equal to buy. He cited the stock’s undervalued valuation and the potential for continued headwinds from changes Apple (AAPL) made to its iOS operating system.
crypto exchange coinbase (COIN) gave up earlier gains to trade about flat when the group said it would acquire FairX, a derivatives exchange.
Moderna (mRNA) dropped 4.5% after it announced that data from its vaccine trials in two- to five-year-olds would be reported in March.
Boeing (BA) is up 3% on report China may restore the 737 MAX anytime this month,