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S&P 500, Nasdaq book longest win streak since March as investors await Friday jobs report

4:33 pm ET July 7, 2022 (MarketWatch)

By Joy Wiltermuth and Joseph Adinolfi

Fed speakers talk down recession odds

U.S. stocks finished higher on Thursday, with the S&P 500 index and Nasdaq Composite booking a fourth day in a row of gains, as investors await Friday's June jobs report.

Investors also heard a pair of Fed officials speaking Thursday about why its plans to combat high inflation still can avoid triggering an economic recession.

How did stocks do?

On Wednesday, the Dow Jones Industrial Average rose 70 points, or 0.23%, to 31,038, the S&P 500 increased 14 points, or 0.36%, to 3,845, and the Nasdaq Composite gained 40 points, or 0.35%, to 11,362.

What drove markets

Stocks finished higher Thursday, putting them on pace for a string of weekly gains to kick off July.

"It's a calm before the storm," said Marvin Loh, senior global macro strategist at State Street Global Markets, referring to the release Friday morning of the June jobs report.

"Inflation and employment prints are the most important right now," Loh said by phone. "Anything significantly off from expectations is going to read as potentially signaling some sort of trend," which could influence the Fed's interest rate-hiking plans through year-end, he said.

Read:Hiring in U.S. likely fell to 18-month low in June --250,000 new jobs forecast

The tech-heavy Nasdaq led the market higher as investors also reacted to the fall in commodity prices over the past month, which has helped to cause a moderation in inflation expectations and a fall in bond yields from their recent peak. The shift has benefited growth stock valuations.

Even as crude oil prices snapped a 2-day skid on Thursday, they remained down nearly 20% over the past month, though energy stocks rallied on the day, reversing some recent losses. Chevron (CVX) rose 2%, while Exxon (XOM) gained 3.2%.

Paul Nolte, a portfolio manager at Kingsview Asset Management, said economic growth fears that triggered the pullback in commodity prices also have inspired a shift in thinking about the Federal Reserve's plans.

Investors increasingly are betting that the central bank won't need to be as aggressive with its interest rate hikes.

"Markets right now are betting that the Fed is going to break and follow the economy, not necessarily inflation," Nolte said.

Instead, traders are hoping that the battering delivered to stocks this year means that there might be an opportunity for the market to be pleasantly surprised when the U.S. second quarter earnings reporting season enters full swing next week.

While awaiting Friday's jobs report, investors heard from several Fed officials, including Fed Gov. Christopher Waller who said he backs a 75 basis point rate hike later this month, and likely another 50 basis point increase in September. Waller also said recession worries are "overblown."

St. Louis Federal Reserve President James Bullard said Thursday that he didn't see a U.S. recession on the horizon, but that there's a "good chance" of a soft economic landing.

The benchmark 10-year Treasury yield rose for a second day in a row, up 9.6 basis points to 3.007%.

Data released Thursday by the Labor Department showed the number of Americans filing new claims for jobless insurance increased by 4,000 last week, while the number of ongoing claims increased by 51,000.

The U.S. also saw its trade deficit narrow in May, data that Capital Economics says could help bolster growth in the second quarter. Lately, investors have increasingly feared that the U.S. economy might see slow growth, or perhaps even a contraction, during the second quarter.

Single stock movers

Other markets

--Jamie Chisholm contributed reporting to this article.

-Joy Wiltermuth


(END) Dow Jones Newswires

July 07, 2022 16:33 ET (20:33 GMT)

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