S&P 500, Nasdaq rise in volatile session

Stocks rose on Thursday, with all three major U.S. indexes in the green after shaking off earlier losses.

The S&P 500 gained 1.4%, while the technology-focused Nasdaq Composite gained 2.4%. The Dow Jones Industrial Average rose about 0.9%. Major stock indexes fell on Wednesday in a volatile trading session to start the month.

Investors have struggled in recent months to gauge how much and how quickly the Federal Reserve will raise interest rates in a bid to temper inflation. Some fund managers worry that tighter policies could slow economic growth or even tip the United States into a recession. Supply chain disruptions exacerbated by the pandemic have been further war in ukraine and China’s zero Covid strategy. This has increased the cost of energy, food and other basic necessities.

Some investors said they believe recent data suggests the US economy is softening and inflation is cooling, meaning the Fed may not need to act more aggressively than expected. Vice Chairman of the Federal Reserve Lael Brainard said on Thursday interest rate hikes of half a percentage point would likely be appropriate in the next two Fed meetings, but it has not committed to a slower course in subsequent meetings.

That helped fuel Thursday’s risk appetite among investors, with all but two of the S&P 500’s 11 sectors gaining recently. Aoifinn Devitt, chief investment officer at Moneta, said consumer strength and falling stock valuations are helping to improve the outlook for equities, which have generally fallen in 2022.

“Rumor has it that’s a good entry point, that stocks have sold so much they’ve been overdone,” Ms. Devitt said. His firm has increased its positioning in assets that act as a hedge against rising inflation.

Crude prices rose after the Organization of the Petroleum Exporting Countries and non-OPEC oil producers led by Russia agreed at a meeting on Thursday to a higher-than-expected price increased oil production. The United States and Europe have pressed the group, dubbed OPEC+, to pump more crude, as Russia’s invasion of Ukraine sent oil prices soaring.

Brent futures, the global oil benchmark, recently rose about 1% to $117.48.

“The fear is that demand will always outstrip supply and that the increased supply will not make up the difference,” said Peter E. Klingelhofer, managing director, investment management at investment advisory firm Hamilton Capital. in Columbus, Ohio. His company is overweight energy stocks.

US stocks were down on Wednesday, the first trading day of June, after closing a volatile month.


Photo:

Michael Nagle/Bloomberg News

In the bond markets, the return of the benchmark index 10-year US treasury bond was trading at 2.913% on Thursday versus 2.930% on Wednesday. Yields and prices move in opposite directions.

Stocks have fallen this year and investors are looking for signs that the recent rout is over. Joseph Zappia, director and co-chief investment officer at LVW Advisers, said he was watching for signs of seller exhaustion, including rallies on large volumes and companies reporting bad news that didn’t drag the market down. down.

“Markets have risen too much too fast due to all the stimulus, liquidity and Covid-19. Prices have grown much faster than earnings for a lot of that and now a lot of that money just has to get out of the system,” Zappia said. His company shifted to defensive sectors, moving away from discretionary stocks.

Investors are watching labor market data. Fed Chairman Jerome Powell said worried in recent months that the labor market is overheating. A tight labor market can add to inflation because competition for workers strengthens wage bargaining power.

The ADP jobs report showed the private sector added 128,000 jobs in May, less than the 299,000 expected by economists polled by The Wall Street Journal. Initial jobless claims dropped to 200,000 last week from the previous week’s revised level of 211,000, the Labor Department said Thursday. The number is considered a proxy for layoffs.

“It’s a very difficult environment. There are so many factors at play here, and the dynamics are very difficult to interpret,” said Peter Garry, Head of Equity Strategy at Saxo Bank. “We think the Fed will have to be extremely aggressive to get inflation under control.”

Microsoft shares recovered from early losses, up 0.3%. Softwares the company cut its sales and profit forecasts for the current quarter, citing the impact of exchange rates as the strengthening US dollar takes its toll. Analysts said the news was the latest example of companies facing dollar margin pressure this year.

In the other individual shares, the shares of

Soft

rose 23% after the online pet products retailer posted a surprise profit and forecast a revenue range well above Wall Street estimates.

MongoDB

shares rose 18% after the database company’s results beat Wall Street estimates.

Overseas, the pancontinental Stoxx Europe 600 index gained 0.6%, ending a two-day losing streak. UK markets were closed for a holiday.

Major Asian indices closed lower, with South Korea’s Kospi and Hong Kong’s Hang Seng each down 1%. Japan’s Nikkei 225 edged down 0.2%, while China’s Shanghai Composite reversed the trend to gain 0.4%.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Hardika Singh at hardika.singh@wsj.com

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