Market Snapshot: U.S. stock market climbs after solid data, ECB announcement

MarketWatch - Financial Services Industry News

U.S. stock-market indexes climbed modestly on Thursday, as the European Central Bank announced that it plans to end its bond-buying program at the end of the year but pledged to keep rates at present levels until at least next summer.

A flurry of stronger-than-expected economic data also lent support to stocks.

What are markets doing?

The S&P 500
SPX, +0.08%
 advanced 9 points, or 0.3%, to 2,784, with a 0.5% decline in shares of financails limiting gains from technology and consumer discretionary, both up 0.7%.

The Nasdaq Composite Index
COMP, +0.47%
 gained 40 points, or 0.2%, to 7,752, setting an intraday record. The tech-heavy index is on track to close in record territory.

The Dow Jones Industrial Average
DJIA, -0.17%
 rose 37 points, or 0.2%, to 25,241.

The upbeat trading action came after declines on Wednesday, when the main benchmarks ended near session lows. Stocks fell after the Fed raised interest rates and struck an unexpectedly hawkish tone for the rest of 2018. The central bank hinted at two more hikes this year, rather than the one additional move that had previously been predicted.

What is driving the market?

Central bank activity was the primary driver of the day. Meeting just a day after the Fed lifted interest rates for the second time this year, the ECB was in the spotlight on Thursday after it left interest rates unchanged and laid out plans to taper its program of monthly bond purchases later this year. The central bank is aiming to bring them to a halt by the end of 2018.

Aside from the central banks, trade worries continued to be on traders’ minds on Thursday. President Donald Trump’s administration is preparing to announce tariffs on tens of billions of dollars in Chinese goods as early as Friday, a move that is feared to trigger retaliatory action by China.

What’s on the economic calendar?

Retail sales nationwide jumped by 0.8% last month, twice as high as the MarketWatch forecast.

The import price index in May rose by 0.6% for the second straight month, adding to mounting evidence of higher inflation.

New jobless claims dropped by 4,000 to 218,000 in the latest week. The more stable monthly average of new claims dipped by 1,250 to 224,250.

Business inventories in the U.S. rose 0.3% in May to rebound from a decline in the prior month.

What are analysts saying?

“The ECB said they will not raise rates until 2019 and if the situation warranted they could slow down the taper, so in all, the announcement was fairly dovish,” said Quincy Krosby, chief market strategist, at Prudential Financial.

Krosby noted that the mild pullback in stocks on Wednesday after the Fed meeting had more to do with headlines about China tariffs, rather than the possibility of a fourth rate increase.

Kate Warne, investment strategist at Edward Jones, said she wasn’t surprised by the muted action on Wall Street.

“Today’s ECB announcement was very well telegraphed, so it’s not surprising to see markets move only slightly,” Warne said.

“Both the Fed and ECB decisions are coming in at a time when global economy is improving. And despite some recent softness in European data, it was not enough to delay the tapering plans,” Warne said.

Which stocks are in focus?

Shares of Tailored Brands Inc.
TLRD, -23.77%
 tanked 22% after the retailer late Wednesday reported comparable sales below analyst forecasts.

Shares of Royal Caribbean Cruises Ltd.
RCL, +5.02%
 rose 4.7% after it said it was buying a 66.7% stake in privately-owned Silversea Cruises for $1 billion.

21st Century Fox Inc.
FOXA, +1.57%
added 1.8% after Comcast Corp.
CMCSA, +3.17%
 on late Wednesday offered to buy a big chunk of Fox’s entertainment and international assets for $65 billion. That offer was about 19% higher than Walt Disney Co.’s
DIS, +2.13%
 offer. Disney shares were 1.7% higher, while Comcast shares jumped 5%.

Oracle Corp.
ORCL, -3.85%
 shares sank 4.3% after J.P. Morgan analysts downgraded the enterprise software company, citing signs that spending on the company’s products would decline.

Nike Inc.
NKE, +0.57%
 rose 1% after Wedbush analyst Christopher Svezia raised his price target on the stock to $82 from $75.

Adobe Systems Inc.
ADBE, +0.41%
 is slated to report earnings after the market closes.

What are other markets doing?

Stocks in Asia closed lower across the board as traders there reacted to the Fed decision. The People’s Bank of China decided not to follow the Fed in raising interest rates, defying expectations that the Chinese policy makers would follow their usual pattern and respond with small hikes to Fed moves.

Europe jumped after the ECB decision, with the Stoxx Europe 600 index
SXXP, +1.27%
 up 1.2%.

The dollar rallied up against most other major currencies, sending the ICE U.S. Dollar Index
DXY, +0.93%
 0.8% higher to 94.441. The euro
EURUSD, -1.1704%
 slid 1.3% against the buck, buying $1.1637.

Crude-oil prices
CLN8, -0.32%
 were higher, while gold
GCQ8, +0.59%
 gained 0.8%.

U.S. yields retreated, with the 10-year Treasury rate
TMUBMUSD10Y, -0.62%
 down 3.6 basis points at 2.953%.


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