U.S. Stocks Turn In Lackluster Performance Ahead Of Key Inflation Reading

Stocks moved in opposite directions at the start of trading on Thursday and continued to experience choppy trading throughout the session. The Dow ended the day firmly positive, while the broader Nasdaq and S&P 500 closed near the unchanged line.

While the tech-heavy Nasdaq ended the day down 1.72 points or less than a tenth of a percent at 13,736.28, the Dow rose 141.59 points or 0.4 percent to 34,464.64 and the S&P 500 inched up 4.89 points or 0.1 percent to 4,200.88.

The lackluster performance on the day came as traders continued to look ahead to a highly anticipated reaching on inflation due out Friday.

The inflation reading is said to be preferred by the Federal Reserve and could have a significant impact on the outlook for monetary policy.

Traders were also digesting a report from the Labor Department showing weekly jobless claims once again fell to a new pandemic-era low.

The Labor Department said initial jobless claims slid to 406,000 in the week ended May 22nd, a decrease of 38,000 from the previous week’s unrevised level of 444,000. Economists had expected jobless claims to dip to 425,000.

Jobless claims decreased for the fourth consecutive week, once again falling to their lowest level since hitting 256,000 in the week ended March 14, 2020.

The continued decrease in jobless claims paints a positive picture of the labor market but also raised concerns that the Fed will move closer to tapering its asset purchases in the near future.

A separate report from the Commerce Department showed an unexpected pullback in durable goods orders in April, although the decrease was largely due to a steep drop in orders for transportation equipment.

The report showed durable goods orders tumbled by 1.3 percent in April after jumping by an upwardly revised 1.3 percent in March.

The pullback surprised economists, who had expected durable goods orders to climb by 0.7 percent compared to the 0.8 percent increase that had been reported for the previous month.

Excluding a 6.7 percent slump in orders for transportation equipment, however, durable goods orders shot up by 1.0 percent in April after spiking by 3.2 percent in March. Economists had expected 0.8 percent growth.

The Commerce Department also released a report showing the pace of U.S. economic growth in the first quarter was unrevised from the advance estimate.

The report showed real gross domestic product spiked by 6.4 percent in the first quarter, unchanged from the estimate provided last month. Economists had expected a modest upward revision in the pace of GDP growth to 6.5 percent.

Meanwhile, a report released by the National Association of Realtors showed pending home sales in the U.S. unexpectedly tumbled to their lowest level in nearly a year in the month of April.

Sector News

Despite the lackluster performance by the broader markets, steel stocks moved sharply higher following news of the first meeting between U.S. Trade Representative Katherine Tai and Chinese Vice Premier Liu He.

A statement from the Chinese Commerce Ministry described the virtual meeting as “candid, pragmatic and constructive” but did not reveal if the discussions included rolling back Trump-era tariffs.

Reflecting the strength in the steel sector, the NYSE Arca Steel Index surged up by 2.8 percent, climbing further off the nearly-one month closing low set on Tuesday.

Significant strength was also visible among oil service stocks, as reflected by the 1.7 percent gain posted by the Philadelphia Oil Service Index.

The strength in the oil service sector came amid a continued increase by the price of crude oil, with crude for July delivery climbing $0.64 to $66.85 a barrel.

Networking stocks also turned in a strong performance on the day, driving the NYSE Arca Networking Index up by 1.4 percent to its best closing level since reaching a record closing high in February.

Banking stocks also showed a strong move to the upside, while tobacco and gold stocks came under pressure over the course of the session.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan’s Nikkei 225 Index fell by 0.3 percent, while China’s Shanghai Composite Index rose by 0.4 percent.

The major European markets also ended the day mixed. While the French CAC 40 Index advanced by 0.7 percent, the U.K.’s FTSE 100 Index edged down by 0.1 percent and the German DAX Index dipped by 0.3 percent.

In the bond market, treasuries saw further downside after ending the previous session slightly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.6 basis points to 1.610 percent.

Looking Ahead

Trading on Friday is likely to be driven by reaction to the reading on inflation included in the Commerce Department’s report on personal income and spending.

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