U.S. stocks ended mostly higher Thursday, getting a boost from the financial sector, on positive tones from the banking sector and the economy.
The Dow Jones Industrial Average rose about 269 points, or 0.8%, ending near 34,122, according to preliminary FactSet data. The S&P 500 index ended 0.5% higher, while the Nasdaq Composite Index closed virtually unchanged.
The S&P 500’s financial sector was a standout, climbing 1.7%, a day after 23 of the nation’s biggest banks passed annual “stress tests,” designed to model their ability to withstand a severe global recession scenario. The U.S. economy also saw a revised gross domestic product reading of 2% in the first quarter.
Federal Reserve Chairman Jerome Powell on Thursday also downplayed concerns that the Federal Reserve might be at risk of going too far with its rate hikes, at a meeting with other global central bankers in Spain, while also saying that coming rate decisions would be decided on a meeting-to-meeting basis, marketwatch cited.
The higher close on Wall Street partly reflected a positive reaction to the results of the Federal Reserve’s annual bank stress test.
The Fed said the results demonstrate that large banks are well positioned to weather a severe recession and continue to lend to households and businesses even during a severe recession.
“All 23 banks tested remained above their minimum capital requirements during the hypothetical recession, despite total projected losses of $541 billion,” the Fed said.
Meanwhile, traders were also reacting to another batch of largely upbeat U.S. economic data, which further eased recession worries but also renewed concerns about the outlook for interest rates
The Labor Department released a report showing an unexpected pullback by first-time claims for U.S. unemployment benefits in the week ended June 24th.
The report said initial jobless claims fell to 239,000, a decrease of 26,000 from the previous week’s revised level of 265,000. Economists had expected jobless claims to rise to 270,000 from the 264,000 originally reported for the previous week, RTTNews cited.
The upwardly revised figure for the previous week reflected the most jobless claims since the week ended October 23, 2021.
A separate report released by the Commerce Department showed the U.S. economy grew by much more than previously estimated in the first quarter of 2023.
The Commerce Department said gross domestic product jumped by 2.0 percent in the first quarter compared to the previously estimated 1.3 percent increase. Economists had expected the pace of GDP growth to be unrevised.
Oil service stocks moved sharply higher over the course of the session, driving the Philadelphia Oil Service Index up by 2.0 percent to its best closing level in nearly two months.
The strength in the oil service sector came amid a continued increase by the price of crude oil, with crude for August delivery rising $0.30 to $69.86 a barrel.
Significant strength was also visible among steel stocks, as reflected by the 1.9 percent jump by the NYSE Arca Steel Index. The index also reached a two-month closing high.
Banking stocks also turned in a strong performance following the release of the stress test results, moving notably higher along with networking, brokerage and natural gas stocks.
Trading on Friday is likely to be driven by reaction to a report on personal income and spending in the month of May, which includes readings on inflation said to be preferred by the Federal Reserve.
