U.S. stocks shake off rate-hike worries to end mostly higher

By William Watts and Joseph Adinolfi

S&P 500, Nasdaq snap losing streak, while Dow industrials suffer 4th straight decline

U.S. stocks shook off early weakness to end mostly higher Thursday as investors digested fresh commentary from Federal Reserve Chairman Jerome Powell and a raft of interest-rate hikes from global central banks.

How did stocks trade?

All three major indexes lost ground Wednesday, marking a three-day losing streak.

What's driving markets

U.S. stocks steadied after putting in a modest pullback from the 14-month highs set by the S&P 500 and Nasdaq Composite late last week.

Tech-related stocks, which paced the pullback after leading the rally, were back on the upswing in Thursday's session. Consumer-discretionary, tech and communications services sectors led gains for the S&P 500.

Despite the threat of higher interest rates, stocks have powered higher since the beginning of 2023, thanks in large part to advances made by shares of a handful of tech stocks, especially those benefiting from the boom in artificial intelligence software, such as Nvidia Corp. NVDA, Microsoft Corp. MSFT, Apple Inc. AAPL and Google parent Alphabet Inc.'s Class A GOOGL and Class C GOOG. The S&P 500 has risen more than 14% year-to-date, according to FactSet data. Many of these megacap tech names, including Tesla Inc., where helping to keep the Nasdaq in the green on Thursday.

Meanwhile, Powell said Thursday that senior Fed officials largely expect the Fed to hike interest rates "a couple of times" later this year, although the timing of any hikes will depend on what the economic data show.

The Fed has raised its policy rate by 5 percentage points since March 2022, increasing the cost of borrowed money at the fastest pace since the 1980s. The aggressive campaign, undertaken to tame inflation, triggered a punishing selloff in both stocks and bonds in 2022.

Earlier Thursday the Bank of England lifted its key rate by 50 basis points, or half a percentage point, a larger-than-expected move. Most economists expected a quarter-point move from the Bank of England. The BOE move followed a half-point hike earlier Thursday from Norway's central bank, which warned that a further hike may be needed in the near term. The Swiss National Bank also hiked interest rates on Thursday.

"As investors evaluate artificial intelligence developments, productivity gains, and efficiency improvements across corporate America, hawkish central banks lurk in the background," said Jose Torres, senior economist at Interactive Brokers, in a note.

"With prices continuing to rise at a brisk pace, pandemic savings unwinding, and student loan repayments ensuing this October, hawkish monetary officials may not be the only threat to this year's exciting equity rally that has pushed the S&P 500 index up roughly 18% year to date," he wrote.

A batch of fresh U.S. economic data arrived on Thursday, including a weekly update on the number of Americans applying for first-time unemployment benefits, which came in flat at 264,000, still the highest level since late 2021.

Existing-home sales data showed activity in the U.S. rose slightly in May amid a shortage of homes for sale and high mortgage rates. However, the median price for an existing home fell 3.1%, the largest drop since December 2011.

-William Watts

Companies in focus

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06-22-23 1627ET

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