By Stephen Culp
NEW YORK (Reuters) -U.S. stocks gained ground on Thursday and benchmark Treasury yields moved higher after robust U.S. labor market data weakened bets that the Federal Reserve would begin lowering its key policy rate as early as March.
The S&P 500 and the Nasdaq were higher, tech- and tech-adjacent momentum stocks providing much of the upside muscle, while more defensive sectors kept the Dow essentially flat.
A report from the Labor Department showed initial claims for unemployment benefits slid to their lowest level since Sept. 2022, casting further doubt as to whether the U.S. central bank will cut its Fed funds target rate at the conclusion of its March policy meeting.
That, in addition to fears of escalation of conflicts in the Middle East, helped keep upward pressure on Treasury yields.
“Over the last few days, the economic data has been showing signs of resilience,” said Greg Bassuk, chief executive officer at AXS Investments in New York. “And the irony is that while the stronger-than-anticipated economy is good for corporations and investors, it’s throwing cold water on expectations that we’ve got a rate cut coming in March.”
“So you’ve got both bullish and bearish investors coming off the sidelines, really focused on the economic data, knowing that that’s really going to drive Fed policy in 2024,” Bassuk added.
Financial markets are pricing in a 55.7% likelihood that the Fed will cut rates at its March meeting, down from 70.2% a week ago, according to CME’s FedWatch tool.
The Dow Jones Industrial Average fell 14.49 points, or 0.04%, to 37,252.18, the S&P 500 gained 21.92 points, or 0.46%, to 4,761.13 and the Nasdaq Composite added 162.34 points, or 1.09%, to 15,017.97.
European shares gained ground, boosted by upbeat earnings as investors looked to the release of the European Central Bank’s policy meeting minutes expected later in the day.
The pan-European STOXX 600 index rose 0.59% and MSCI’s gauge of stocks across the globe gained 0.46%.
Emerging market stocks rose 0.36%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.38% higher, while Japan’s Nikkei lost 0.03%.
U.S. Treasury yields got a boost from the robust jobless claims data, suggesting the Fed could hold off on lowering rates for longer than previously anticipated.
Benchmark 10-year notes last fell 4/32 in price to yield 4.119%, from 4.104% late on Wednesday.
The 30-year bond last fell 16/32 in price to yield 4.3402%, from 4.312% late on Wednesday.
The dollar held steady near a 5-week peak against a basket of world currencies as optimism over a March rate cut faded.
The dollar index rose 0.02%, with the euro down 0.24% to $1.0855.
The Japanese yen strengthened 0.01% versus the greenback at 148.15 per dollar, while Sterling was last trading at $1.2675, up 0.02% on the day.
Crude prices advanced after the International Energy Agency (IEA) echoed OPEC+ in forecasting strong global oil demand this year as geopolitical risks in the Middle East kept supply concerns on the front burner.
U.S. crude rose 0.88% to $73.20 per barrel and Brent was last at $78.26, up 0.49% on the day.
Gold increased as mounting geopolitical concerns, particularly turmoil in the Middle East, enhanced the safe-haven metal’s appeal.
Spot gold added 0.4% to $2,013.59 an ounce.
(Reporting by Stephen Culp; editing by Barbara Lewis)
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