U.S. Stocks Seeing Modest Strength, Dow Climbs Above 40,000 For First Time

(RTTNews) - Stocks are seeing modest strength during trading on Thursday, extending the rally seen in the previous session. The major averages have reached new record highs, with the Dow climbing above 40,000 for the first time.

The major averages have pulled back off their highs in recent trading but currently remain in positive territory. The Dow is up 77.98 points or 0.2 percent at 39,985.98, the Nasdaq is up 25.03 points or 0.2 percent at 16,767.42 and the S&P 500 is up 8.52 points or 0.2 percent at 5,316.67.

The modest strength on Wall Street comes as traders continue to express optimism about the outlook for interest rates following yesterday's tamer-than-expected consumer price inflation data.

A closely watched Labor Department showed consumer prices rose by less than expected in April, reinforcing expectations the Federal Reserve will lower interest rates in the coming months.

According to CME Group's FedWatch tool, the chances rates will be a quarter point lower by September have reached 89.5 percent.

Potentially adding to the interest rate optimism, the Labor Department released a report this morning showing a pullback by initial jobless claims in the week ended May 11th.

The Labor Department said initial jobless claims slid to 222,000, a decrease of 10,000 from the previous week's revised level of 232,000.

Economists had expected jobless claims to fall to 220,000 from the 231,000 originally reported for the previous week.

The pullback came after jobless claims rose to their highest level since the week ended August 26, 2023 in the previous week.

Meanwhile, traders have largely shrugged off a separate Labor Department report showing U.S. import prices jumped by much more than expected in April.

The report said import prices shot up by 0.9 percent in April after climbing by an upwardly revised 0.6 percent in March.

Economists had expected import prices to rise by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

The annual rate of growth by import prices also accelerated to 1.1 percent in April from 0.4 percent in March, reflecting the largest over-the-year increase since December 2022.

"The surge in April import prices won't instill the Fed with greater confidence inflation is decelerating, but officials will assuredly put much more stock in yesterday's CPI report which was a small step in the right direction and keeps a rate cut in September, our baseline forecast, firmly on the table," said Matthew Martin, U.S. Economist at Oxford Economics.

A separate report released by the Fed showed U.S. industrial production came in flat in the month of April, with a surge in utilities output offset by decreases in mining and manufacturing output.

The Fed said industrial production came in unchanged in April after inching up by a downwardly revised 0.1 percent in March.

Economists had expected industrial production to edge up by 0.1 percent compared to the 0.4 percent increase originally reported for the previous month.

Sector News

Despite the modest strength being shown by the broader markets, housing stocks have moved significantly lower, dragging the Philadelphia Housing Sector Index down by 1.7 percent.

The index is pulling back off its best closing level in well over a month after a Commerce Department report showed a rebound by housing starts in April but a continued slump by building permits.

Notable weakness is also visible among airline stocks, as reflected by the 1.2 percent loss being posted by the NYSE Arca Airline Index.

On the other hand tobacco stocks, have shown a strong move to the upside, driving the NYSE Arca Tobacco Index up by 1.1 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index jumped by 1.4 percent, while Hong Kong's Hang Seng Index surged by 1.6 percent.

Meanwhile, the major European markets have moved to the downside on the day. While the U.K.'s FTSE 100 Index has edged down by 0.1 percent, the French CAC 40 Index and the German DAX Index are both down by 0.6 percent.

In the bond market, treasuries have pulled back near the unchanged line after seeing initial strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is unchanged at 4.356 percent.