The three key US stock indexes - the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite - rose 0.2% on the average on Thursday, rising after a combined loss of 2.6% in two previous days.
Stocks rose after US jobless claims resumed their downward trend with a 3% decline last week that some economists said marked a near 55-year low.
Unemployment among Americans reached a record high of 14.8% in April 2020, with the loss of some 20 million jobs in the aftermath of the coronavirus breakout. Jobs recovery has, however, been stellar over the past year, with the jobless rate moving down to 3.6% in March. A jobless rate of 4% or below is regarded by the Federal Reserve as “maximum employment.”
The sterling jobs data was, however, offset by comments from the Federal Reserve’s most hawkish policy-maker, James Bullard, who said on Thursday that interest rates must breach the central bank’s typical target and go as high as 3.5% later this year, in order to suppress inflation growing at twice the pace.
After slashing rates to nearly zero at the height of the COVID-19 outbreak, the Federal Reserve’s policy-making Federal Open Market Committee (FOMC) approved the first pandemic-era rate hike on March 16, raising rates by 25 basis points, or a quarter point.
Many FOMC members have concluded since that the hike was too tame to rein in inflation galloping at 40-year highs and that more aggressive increases of 50 basis points may be needed in the future. The central bank is also considering as many as seven rate adjustments in all this year.
The pace of hikes suggested by Bullard implied that the central bank should embark on 50 basis point, or half-point increases, at each of its six remaining meetings for the year. The Federal Reserve’s typical target for inflation is just 2% a year.
Stocks came off their highs as investors’ “fears grew that the Fed may have to be much more aggressive in tightening policy over the next few meetings,” Ed Moya, analyst at online trading platform OANDA, said. “Inflation is everywhere and that has stock investors nervous.”
At the close, Wall Street’s S&P 500 - which groups the top 500 US stocks - was up just 20 points, or 0.4.%, at 4,501. It hit a high of 4,521 earlier in the session.
The Dow Jones Industrial Average, which lists travel, aviation and cross-industry value stocks, finished up 87 points, or 0.3%, at 34,584. The Dow rose to as high as 34,706 earlier.
The Nasdaq Composite, which houses the biggest technology names of the world, including Amazon, Apple, Netflix and Google, edged up just 8 points, or 0.06%, to close at 13,897. Nasdaq earlier rallied to 13,978.