Wall Street ends higher as Fed signals dovish bias; jobs report eyed

It was a shot straight up on all the indexes from the outset and continuing until close, both the Dow and the Nasdaq respectably up 3-digits.  It was another day of ‘bad news = good news’ as a collection of new data including muted jobless claims, rising labor costs and a sharp deceleration in productivity showed weakening economic conditions which points toward earlier rate cuts. 

And investors continue to parse yesterday’s Fed comments that the next move will be a rate cut.  As today’s expert put it, “The takeaway from yesterday is that the Fed’s bias is still a downward, hold steady or cut rates. Any sign of economic weakness or lower inflation, they are going to be ready to jump on it and cut.”  373 S&P companies have reported with 77% beating estimates. Friday’s labor report is anxiously awaited. Volume is just a tad above average at 11.19 billion. 

Wall Street ends higher as Fed signals dovish bias; jobs report eyed

By Stephen Culp

Thu May 2, 2024 4:21 PM

DJ: 37,903.29  +87.37        NAS: 15,605.48  -52.34        S&P: 5,018.39  -17.30      5/1

DJ: 38,225.66  +322.37      NAS: 15,840.96  +235.48     S&P: 5,064.20  +45.81     5/2

NEW YORK May 2 (Reuters) - U.S. stocks rallied on Thursday as investors weighed the Federal Reserve's more dovish-than-expected interest rate guidance on Wednesday against a plethora of mixed earnings and economic data.  All three indexes ended in positive territory.  The tech-heavy Nasdaq led the way, advancing 1.5% with healthy boost from chip stocks after Qualcomm (QCOM.O), opens new tab reported quarterly sales and profit above analysts' expectations. 

Markets continued to parse Fed Chair Jerome Powell's assurances on Wednesday that the central bank's next policy move will be to lower its key policy rate, after it left rates unchanged at the end of its monthly meeting. However, he noted that recent strong inflation readings have suggested that first of these rate cuts could be a long time in coming.  "The takeaway from yesterday is that the Fed's bias is still a downward, hold steady or cut rates," said Paul Nolte, senior wealth advisor and market strategist at Murphy & Silvest in Elmhurst, Illinois.  "They're not willing to raise rates from here. They'll keep rates steady, and any sign of economic weakness or lower inflation, they are going to be ready to jump on it and cut."

Data released on Thursday included muted jobless claims, a drop in planned layoffs, a surge in quarterly labor costs and a sharp deceleration in productivity, all of which throws focus on Friday's closely watched April employment report.  "The Fed has been consistent in saying they're going to be data dependent," said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. "We went into this year thinking there could be more cuts, earlier. "The data hasn't supported that."

The Organization for Economic Cooperation and Development (OECD) upgraded its global growth outlook, thanks in part to the U.S. economy's resilience.  First-quarter earnings season has rounded the corner, with 373 of the companies in the S&P 500 having reported. Of those, 77% have posted better-than-expected results, according to LSEG data.

"The common theme (this quarter) is those companies that are beating expectations aren't really being rewarded as much as they have in prior quarters," Nolte added. "And those that are missing expectations are getting shellacked."

Among individual stocks, Qualcomm advanced 9.8% following its earnings beat.  Shares of used car platform Carvana(CVNA.N), opens new tab surged 33.8 % on its upbeat profit forecast.  But disappointing profit guidance sent DoorDash's (DASH.O), opens new tab stock down 10.3 %.  Etsy (ETSY.O), opens new tab shares slid 15.0 % after the online marketplace missed Wall Street expectations for first-quarter gross merchandise sales and profit.  Peloton (PTON.O), opens new tab dropped 2.5 % after the fitness equipment maker's CEO stepped down and the company announced a 15% cut to its global workforce.

The Dow Jones Industrial Average (.DJI), opens new tab rose 322.37 points, or 0.85%, to 38,225.66. The S&P 500 (.SPX), opens new tab gained 45.81 points, or 0.91%, at 5,064.2 and the Nasdaq Composite (.IXIC), opens new tab added 235.48 points, or 1.51%, at 15,840.96.  Nine of the 11 major S&P sectors ended higher, with tech firms (.SPLRCT), opens new tab leading the gainers.  Materials (.SPLRCM), opens new tab suffered the largest percentage loss.

Advancing issues outnumbered decliners on the NYSE by a 3.63-to-1 ratio; on Nasdaq, a 2.29-to-1 ratio favored advancers.  The S&P 500 posted 15 new 52-week highs and eight new lows; the Nasdaq Composite recorded 59 new highs and 89 new lows.

Volume on U.S. exchanges was 11.19 billion shares, compared with the 11.04 billion average for the full session over the last 20 trading days.