Stocks advanced on Thursday after the U.S. House passed a debt ceiling bill in a crucial step to avoid a default, with the measure moving to the Senate.
The Dow Jones Industrial Average traded up 153.3 points, or 0.47%, to end at 33,061.57 despite a 4.7% tumble in Salesforce shares a day after its earnings report. The S&P 500 gained 0.99% to finish at 4,221.02, while the Nasdaq Composite added 1.28% to end at 13,100.98. Both the S&P 500 and Nasdaq closed at their highest levels since August 2022.
The Fiscal Responsibility Act passed by a vote of 314-117 with bipartisan support on Wednesday night. Senate Majority Leader Chuck Schumer, D-N.Y., said the Senate will stay in session until a bill is sent to President Biden's desk.
"Anytime a big negative or a big potential negative catalyst is removed, it helps remove some uncertainty from the market," said Ross Mayfield, investment strategy analyst at Baird. "But at the same time, the equity market, at least, had really looked through this story."
Beyond the debt ceiling battle, investors are looking ahead to the Federal Reserve's June 13-14 policy meeting as another possible market catalyst. Philadelphia Fed President Patrick Harker said Thursday that he thinks the central bank is near the point of being able to stop interest rate hikes. But he said earlier in the week that Friday's payrolls report could change impact how he'll vote at the upcoming gathering.
Data from ADP showed private payrolls grew more than economists expected in May, while the number of jobless claims filed last week was smaller than economists forecasted. The labor market has been a closely watched area of the economy given concerns that sustained strength could prompt the Fed to once again raise interest rates at its policy meeting later this month.
"A lot of the market focus is shifting from whether the government is going to default on its debts, which was never going to happen, to the more pressing issue of how much further interest rates are going to rise," said Jamie Cox, managing partner of Harris Financial.
The Nasdaq is up nearly 1% week to date, putting the technology-heavy index on pace for six straight weekly wins — a streak length not seen since January 2020. The S&P 500 is on track to end around 0.4% higher, while the Dow is poised to lose 0.1% on the week.
Stocks close Thursday higher
CrowdStrike stock is 'best in class,' JPMorgan says
Cybersecurity firm CrowdStrike is a "best in class" stock" thanks to strong growth and stronger-than-expected profitability, according to JPMorgan.
The firm reiterated an overweight rating on shares of CrowdStrike on Thursday. The stock has been on fire so far in 2023 with a 49% gain, despite slipping about 2% on Thursday.
"Considering valuation at compelling levels, strengthening secular demand trends, and an outlook that implies ongoing fundamental improvement, we believe now is the right opportunity to own CrowdStrike," analyst Brian Essex wrote on Thursday.
— Brian Evans
Investors should focus on generating income, UBS says
UBS believes investors should reposition their portfolio into assets that can provide quality income, the firm's chief investment officer of global wealth management, Mark Haefele, said in a note Thursday.
"We prefer bonds to equities in our global strategy," he wrote. "Income-seeking investors can find appealing yields in high-quality debt of governments, investment grade corporates, and emerging markets," he said.
Haefele sees value in select medium- and long-duration high-grade debt in case the U.S. or Europe enacts steep rate cuts in the face of a more severe growth slowdown. He also favors emerging market bonds over developed market high-yield credit.
When it comes to finding income in dividend stocks, Haefele suggests focusing on quality income as opposed to simply high-dividend stocks due to the uncertainty over interest rates, inflation and growth.
— Michelle Fox
JPMorgan calls Pure Storage an 'evolving AI opportunity'; shares jump 20%
Pure Storage is an "evolving AI opportunity" on the heels of its strong fiscal-first-quarter print, JPMorgan said.
"We recognize that the FY24 growth glidepath is taking a step down this year, largely due to the uncertain macro environment, we think Pure continues to distinguish itself from peers from a product innovation standpoint driving faster growth overall," wrote JPMorgan analyst Pinjalim Bora in a Thursday note to clients, adding that the stock looks attractive for long-term buyers at these levels.
Bora highlighted the data storage company's agreements with more than 10 autonomous vehicle development leaders and penetration into new industries as signs of ongoing AI opportunities.
Shares popped more than 20% on Thursday.
— Samantha Subin
Analysts remain bullish on Salesforce following earnings
Analysts remained optimistic on Salesforce despite the stock dropping on the back of its earnings report.
While the company beat expectations for the quarter and raised guidance, investors focused on management commentary noting there could be pressure as customers pull back on large consulting deals.
Still, Morgan Stanley analyst Keith Weiss kept his overweight rating while raising the price target by $11 to $251, noting the company executed in the first quarter on profitability to create a better model. His new target implies the stock could rally about 12.4% over Wednesday's close.
Still, he noted headwinds tied to the macro economy and artificial intelligence could impact the stock going forward.
Meanwhile, Bank of America analyst Brad Sills reiterated his top pick and buy ratings. He has a similar price target of $250, which implies an 11.9% upside.
The stock lost about 4.5% in Thursday trading. Still, shares are up 61.3% year to date.
— Alex Harring
Friday jobs data will 'underline' Fed challenges, economist says
Data on nonfarm payrolls, the unemployment rate and hourly wages due Friday will highlight the challenges the Fed faces heading into the June policy meeting, according to Joe Davis, chief economist at Vanguard.
Economists polled by Dow Jones expected non-farm payrolls to rise by 190,000 in May, which would be a smaller monthly increase than the 253,000 added in April. They forecast an unemployment rate of 3.5%, slightly higher than the 3.4% seen in April.
Hourly wages are expected to grow 0.3% on a monthly basis and 4.4% compared with the same month a year ago. In April, wages rose 0.48% month over month and 4.45% on an annualized basis.
"We believe tomorrow's labor market report will underline the challenges the Fed continues to face in their push to drive inflation back towards target," Davis said. "We remain of the view that they should raise rates in June to enforce their resolve before pausing for some time to assess the impact on macro conditions, though the more important aspect of our perspectives remains the Fed being on hold through at least the end of the year."
"Indications of continued labor market tightness in tomorrow's report would provide further support for these views," he added.
— Alex Harring
Dell moves higher after releasing earnings
Shares of Dell have resumed trading after the tech company appeared to release its earnings report ahead of schedule.
Dell reported $1.31 in adjusted earnings per share for its first quarter on $20.92 billion of revenue. Analysts surveyed by Refinitiv were looking for 86 cents per share on $20.27 billion of revenue.
Shares of Dell were last up nearly 5%. The stock was up about 1% when it was halted.
Nasdaq Composite on track for first 6-week win streak since 2020
The Nasdaq Composite is on pace to end the week up, in its six straight winning week.
That would be the first weekly win streak of that length since the six-week period ending Jan. 17, 2020.
The index has been helped by a recent rally in stocks with exposure to artificial intelligence. It has gained more than 1% over the course of the shortened, post-holiday trading week.
— Alex Harring, Robert Hum
Shares of Dell halted for pending news
First-quarter earnings scorecard
First-quarter earnings season is winding down with 99% of S&P 500 companies having reported results. Seventy-eight percent of S&P 500 companies have reported a positive earnings-per-share surprise for the quarter, which is above the five-year average of 77%, according to FactSet.
Earnings growth has disappointed compared to the long-term average, however. S&P 500 companies are beating earnings estimates by 6.5% in aggregate, which is below the five-year average of 8.4%, according to FactSet.
— Yun Li
UBS upgrades CSX, says shares can rally 21%
UBS upgraded CSX to buy from neutral on Thursday and raised its price target to $37 from $33, implying nearly 21% upside from Wednesday's close.
The Wall Street firm sees a bottoming in industrial-related volumes in the second or third quarter of 2024. Rail stocks typically bottom several months before volumes bottom, analyst Thomas Wadewitz wrote in a note to clients.
"We see a path to volume growth for CSX in 2024 with intermodal growth of +4% offsetting a -1% decline in merchandise," he said. CSX has also had the most significant improvement in manifest train speed, which positions the company to capture share from trucks, Wadewitz noted.
Shares were up about more than 2% in Thursday's session.
— Michelle Fox