Stocks initially surged on Thursday but experienced fluctuations throughout the trading day, ultimately closing modestly lower. This movement partially countered the significant gains witnessed in the two preceding sessions.
The Dow Jones Industrial Average surpassed the 40,000 mark in morning trading but closed down 38.62 points, or 0.1%, at 39,869.38. The S&P 500 fell 11.05 points, or 0.2%, to 5,297.10, and the Nasdaq declined by 44.07 points, or 0.3%, to 16,698.32.
Early gains on Wall Street extended the rally from Wednesday, driven by optimism regarding interest rates amid tamer-than-expected consumer price inflation data. A Labor Department report revealed that consumer prices rose less than anticipated in April, bolstering expectations that the Federal Reserve might lower interest rates in the coming months. According to CME Group's FedWatch tool, there is an 85.5% likelihood that rates will drop by a quarter-point by September.
However, buying interest waned over the session as traders paused to evaluate the near-term market outlook after major indices hit record highs. In other economic news, the Labor Department reported a decrease in initial jobless claims for the week ending May 11th. Initial claims fell to 222,000, a decrease of 10,000 from the previous week's revised level of 232,000. Economists had forecasted claims to drop to 220,000.
This decline followed a rise in jobless claims to their highest level since August 26, 2023, in the previous week. Meanwhile, traders mostly ignored a separate report from the Labor Department indicating that U.S. import prices increased significantly more than expected in April. The report noted a 0.9% rise in import prices after a revised 0.6% increase in March, with annual growth accelerating to 1.1% in April, the largest increase since December 2022.
Matthew Martin, U.S. Economist at Oxford Economics, commented, "The surge in April import prices won't reassure the Fed that inflation is decelerating, but officials will likely place more importance on yesterday's CPI report, which was a positive step and keeps a rate cut in September, our baseline forecast, firmly in consideration."
A separate Fed report indicated that U.S. industrial production was flat in April, with a surge in utilities output counterbalancing declines in mining and manufacturing output. Industrial production remained unchanged after a downwardly revised 0.1% increase in March. Economists had expected an uptick of 0.1%.
In sector news, housing stocks experienced notable declines, pulling the Philadelphia Housing Sector Index down by 2.8%, following a Commerce Department report showing a rebound in housing starts in April but a continued slump in building permits. Airline stocks also fell, with the NYSE Arca Airline Index dropping by 1.4%. Conversely, tobacco stocks moved higher, pushing the NYSE Arca Tobacco Index up by 1.3%.
In global markets, Asia-Pacific stock indices mostly saw gains on Thursday, with Japan's Nikkei 225 Index rising by 1.4% and Hong Kong's Hang Seng Index surging by 1.6%. However, major European markets trended downward, with the U.K.'s FTSE 100 Index edging down by 0.1%, and the French CAC 40 Index and German DAX Index sliding by 0.6% and 0.7%, respectively.
In the bond market, treasuries moved modestly lower after initial strength, resulting in a 2.1 basis-point increase in the yield on the benchmark ten-year note to 4.377%.
Looking ahead, the economic calendar on Friday is relatively quiet following the recent influx of U.S. data. However, the Conference Board's report on leading economic indicators for April may still attract some attention.
