Written by Stephen Culp
NEW YORK (Reuters) – U.S. stocks rebounded from Thursday's selloff as new economic data reignited hopes that inflation continues to cool.
Interest-rate-sensitive large-cap stocks drove the tech-heavy Nasdaq soaring, while the S&P 500 and Dow fell slightly.
The Producer Price Index (PPI) came in weaker than expected, confirming the narrative that price growth is still slowing.
Stocks fell sharply on Wednesday after the better-than-expected CPI data, sending benchmark U.S. Treasury yields to their highest level since November. The report dashed expectations that the central bank could cut rates up to three times by the end of the year, potentially starting as early as its June policy meeting.
“There was a lot of anxiety in the market even leading up to yesterday's CPI release,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. “There was probably just as much concern about today's PPI report, but it was clearly in line with expectations.”
Although the PPI statistics were more encouraging, the data showed that the path of inflation moving downward toward the central bank's annual 2% target may be too meandering for the Fed.
“There is no clear need to adjust monetary policy in the near term,” New York Fed President John Williams said.
Richmond Fed President Thomas Barkin cited the latest inflation data and said the central bank was not yet convinced that price pressures would continue to ease.
“Investors are starting to absorb the possibility of inflation lasting a little longer, and the Fed will continue to be patient. That's their big word right now,” Sroka added.
Investors are now turning their focus to the first-quarter earnings season, when the three largest U.S. banks, JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo Co., Ltd., are scheduled to report results Friday morning.
As of 2:07 p.m. ET, the Dow Jones Industrial Average was up 93.66 points, or 0.24%, at 38,555.17, the S&P 500 was up 42.94 points, or 0.83%, at 5,203.58, and the Nasdaq Composite Index was up 237.51 points, or 1.47. %) rose to 16,407.87.
Among the S&P 500's 11 major sectors, tech stocks led the way, while energy stocks lagged.
The FANG+ index of large-cap momentum stocks clearly outperformed, rising 2.3%.
CarMax fell 11.5% after the used car retailer said its fourth-quarter results missed analysts' expectations and it may miss long-term auto sales goals.
Globe Life fell 43.4% after Fuzzy Panda Research disclosed short positions in the company due to multiple claims of insurance fraud.
Rent the Runway soared 129.9% after the apparel rental company announced it was betting on artificial intelligence to drive growth this year.
Biotechnology company Alpine Immun Sciences will be acquired by Vertex Pharmaceuticals for about $4.9 billion in cash, the companies said. Alpine jumped 36.8%.
On the New York Stock Exchange, advancing issues outnumbered declining issues by a 1.20-to-1 ratio. On the Nasdaq, a 1.35-to-1 ratio favored advancers.
The S&P 500 has recorded seven new highs and six new lows in 52 weeks. The Nasdaq Composite recorded 41 new highs and 103 new lows.
(Reporting by Stephen Culp; Additional reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru; Editing by David Gregorio)