S&P 500 ends up 20% from bear market closing low
U.S. stocks end higher; Nasdaq up ~1%
Cons disc leads S&P sector gainers; real estate weakest group
Dollar down; gold, bitcoin both up; crude slides >2%
U.S. 10-Year Treasury yield falls to ~3.71%
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S&P 500 ENDS UP 20% FROM BEAR MARKET CLOSING LOW (1605 EDT/2005 GMT)
Major U.S. stock indexes ended higher on Thursday, with the S&P 500 .SPX finishing the session up 20% from its bear market closing low on Oct. 12, 2022 as the Nasdaq .IXIC and technology-related shares recovered from losses in the previous session.
The technology sector .SPLRCT was up 1.2%, while consumer discretionary .SPLRCD gained 1.6%. Shares of Tesla TSLA.O jumped 4.6%, extending their recent strong run.
Treasury yields eased as investors digested data that showed the number of Americans filing new claims for unemployment benefits surged last week, which suggests the tight labor market was loosening.
The Federal Reserve still is expected to keep its policy rate unchanged next Wednesday for the first time since March 2022. Technology and other high-growth shares are especially sensitive to higher interest rates.
The CBOE Volatility index .VIX hit a pre-pandemic low.
Here is the closing market snapshot:
ANOTHER DAY, ANOTHER RALLY: TESLA EYES LONGEST WINNING STREAK IN OVER TWO YEARS (1310 EDT/1710 GMT)
Tesla TSLA.O shares are rallying as if it's 2021 again.
The world's most valuable automaker is cruising towards its 10th straight session of gains, which would mark its longest winning streak in about two and a half years.
The reason: a host of catalysts including $7,500 in tax credits that make its mass market electric vehicle Model 3 cheaper than the quintessential family sedan, the Toyota Camry.
At $32,740, the Model 3 is also cheaper than Fisker's $37,500 Ocean Sport SUV and Ford's Mustang Mach-E, which starts at $39,245 after tax credits.
"It's a very, very, very competitive vehicle relative," said Cannacord Genuity analyst George Gianarikas.
The winning streak has lifted the stock by 25% to a more than seven-month high, with gains for the year now totaling nearly 90%. That has pushed Tesla's valuation to over $730 billion, widening the gap between it and the next most valuable automaker Toyota 7203.T to more than $500 billion.
"We believe the China demand story is ramping and that's driving the stock," said Wedbush Securities analyst Daniel Ives, who has an "outperform" rating on Tesla.
China earlier in the day unveiled a nationwide campaign to promote automobile purchases as it looks to shore up demand in the world's largest auto market after a slow economic recovery from pandemic-induced curbs.
Analysts have also cheered a recent visit by Tesla CEO Elon Musk to China and the billionaire's decision to step back from the top management role at Twitter.
(Akash Sriram and Jaspreet Singh)
CREDIT MARKET HEART STILL BEATING -CRESSET (1215 EDT/1615 GMT)
Liquidity – that is the availability of funds to borrow, spend and invest - is the lifeblood of the financial markets. Markets rise when liquidity flows, and fall when it dries up.
The ongoing combination of the highest short-term rates since 2007 and stricter bank lending standards is expected to deliver a one-two punch to risk takers. But, to date, it hasn’t happened.
Jack Ablin, chief investment officer and founding partner at Cresset, takes a look at how to know when those blows might land.
Indeed, Ablin believes that many investors are now waiting for credit conditions to deteriorate.
Meanwhile, he says that banks’ unwillingness to realize losses on their loan books has promoted the proliferation of zombie companies, or those firms whose cash flows don’t cover their debt service.
Cresset estimates that about one-quarter of the Russell 2000 companies, representing nearly one million jobs, are currently not generating enough cash to cover their debt service. Therefore, unless interest rates suddenly turn lower, Ablin thinks these companies will either default or face debt restructuring and the banks will have to write down the loans.
Even with this daunting backdrop, Ablin says credit conditions, as gauged by the public debt markets, remain robust. In fact, he says the credit yield premium on 10-year, BBB bonds is currently trading below its 200-day moving average, suggesting risk conditions continue to prevail.
Ablin's bottom line is that "Like most investors, we're on the lookout for signs of credit deterioration coupled with a recession as firms grapple with higher financing costs and narrower profit margins."
He adds: "We believe bond market credit spreads offer the best early warning indicator of trouble. For now, the credit markets are signaling 'stay the course.'"
SMOKE OF A DISTANT FIRE: JOBLESS CLAIMS, CONSUMER CREDIT (1055 EDT/1455 GMT)
As haze from Canadian forest fires continues to hover around Wall Street on Thursday, investors are trying to decipher smoke signals in the form of recent economic data to determine Fed's forward policy path and the United States' chances of slipping into recession.
The number of U.S. workers filling out initial paperwork for unemployment checks USJOB=ECI jumped 12% last week to 261,000 according to the Labor Department, a larger increase than analysts anticipated.
It was the highest jobless claims print since early November 2021, in fact, and offers among the clearest signals yet that the Fed's restrictive policy is starting to cause cracks in a tight labor market.
It's also a sign that some of the workers swept up in the spiking planned layoffs announced over the eight months or so are beginning to show up on the unemployment line.
"One week's worth of data is nowhere near enough evidence to conclude that claims are now breaking decisively to the upside, but other indicators have been signaling a jump in claims for some time now, most notably the announced job cuts numbers from Challenger and the NFIB survey's measure of hiring intentions," writes Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics.
"Higher claims also are consistent with the ongoing deterioration in credit availability and the lagged effect of the Fed's tightening," Clancy says.
However, ongoing claims USJOBN=ECI, reported on a one-week lag, surprised in the other direction, dipping 2.1% to 1.757 million, closer to the pre-pandemic "normal."
Additionally, in case you missed it, the Federal Reserve released its April data on outstanding consumer credit USCRED=ECI toward the last leg of Wednesday's largely downbeat session.
The report showed slight monthly increase in new non-revolving credit, which includes big-ticket items such as automobiles or college tuition.
Non-revolving credit, which includes credit card balances, grew by $13.49 billion, a slight deceleration from March's $14.81 billion.
Year-on-year, revolving credit outstanding surged 13.1%, compared with the more placid 3.2% annual increase in non-revolving credit balances.
The grand total of outstanding revolving credit now sits at $1.244 trillion. That's 13% higher than last pre-COVID reading and 28% higher than the COVID era trough, when consumers paid down their plastic amid lockdowns.
The data suggests "some households are using credit cards to finance spending in an environment of sticky inflation and diminished savings buffers," says Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
The American consumer, burdened with about 70% of the U.S. economy, continues to spend, as plainly shown by the most recent PCE report, which showed personal outlays rising twice as fast as economists projected.
But the saving rate dipped.
Add lachrymose consumer sentiment to the stew, along with the grim fact that real wage growth (average hourly earnings growth minus core CPI) has been in negative territory since the beginning of last year.
That's a state of affairs that can't go on much longer.
"We think there are limits to how much households can tap their credit cards to finance consumption," Houten adds. "More generally, we expect a slower pace of consumer spending as economic weakness later in the year will curtail household borrowing."
U.S. STOCKS EDGE UP EARLY WITH NASDAQ, TECH STRENGTH (1005 EDT/1405 GMT)
Major U.S. stock indexes are slightly higher in early trading on Thursday, with declines in financials .SPSY offset by gains in technology .SPLRCT.
Nasdaq .IXIC is up after Wednesday's losses and is slightly outperforming the Dow .DJI and S&P 500 .SPX.
Investors are digesting data showing the number of Americans filing new claims for unemployment benefits surged last week, which suggests the tight labor market is loosening.
Among decliners, shares of GameStop GME.N are off sharply, a day after the surprise exit of a CEO handpicked to lead its online expansion.
Here is the early market snapshot:
SHOWDOWN TIME FOR THE MAGNIFICENT SEVEN? (0900 EDT/1300 GMT)
There has been much attention on the narrow leadership provided by what have been called "the magnificent seven."
In a note on Tuesday, Mike O'Rourke, chief market strategist at JonesTrading, said such stocks were responsible for 95% of the S&P 500 index's .SPX YTD gain.
As a proxy for the seven, the 10-member equal-weighted NYSE FANG+TM index .NYFANG contains all of these tech titans: Apple AAPL.O, Microsoft MSFT.O, Alphabet GOOGL.O, Amazon.com AMZN.O, Nvidia NVDA.O, Tesla TSLA.O, and Meta Platforms META.O.
On a closing basis, NYFANG ended Tuesday up about 68% YTD vs about a 12% rise for the S&P 500 .SPX. However, of note, NYFANG slid nearly 3% on Wednesday, suffering its biggest daily drop since Feb. 16.
The NYFANG's downturn came after it ended Tuesday at a potentially extended level: that is, at 1.4x the value of its 200-day moving average (DMA).
What may be significant about this is that the index put in significant highs in February 2020 and in February 2021 also at 1.40x its 200-DMA.
From its February 2020 peak, the NYFANG sold off 34% on a closing basis over 20 trading days (tds). From its February 2021 top, it declined 17% over 14 tds on a closing basis.
In the event the index now retreats to meet the long-term moving average, there could be another significant sell off. The 200-DMA ended Wednesday at 5,531, which is 26% below where NYFANG closed.
The moving average is, however, rising around 9 points per trading day. Even an index decline to the zone defined by its early-April high, at 6,198, and the late-April low, at 5,752, would equate to a decline of around a 17%-23% NYFANG decline from its close on Tuesday.
Thus, if the magnificent seven are about to go on the lamb, it may be critical for the market to see a rotation/broadening.
A breakout above 1.4x on the 200-day disparity may, instead, suggest room for further gains. The NYFANG's record-high 200-day disparity was at 1.55x on Sept. 2, 2020. A rise to this level could, depending on the speed of advance, project a more than 20% NYFANG thrust to new highs.
FOR THURSDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE
early US snapshot https://tmsnrt.rs/43x55EA
Jobless claims https://tmsnrt.rs/3MY791j
Consumer credit https://tmsnrt.rs/3OYlJIT
Tesla jumps to over seven-month high https://tmsnrt.rs/3oTfuvi
Closing US market https://tmsnrt.rs/3CjXHjS
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)</body></html>
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