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 finished Thursday up.
The Dow ended 0.5%. The S&P 500 added 1%, while the Nasdaq Composite surged 1.3%.
— Alex Harring
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
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
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 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
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
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.
—Jesse Pound
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 Technologies are currently halted for pending news, according to the NYSE.
The stock last traded at $45.33 per share, up about 1% on the day.
Dell was scheduled to report its first-quarter results after the bell.
— Jesse Pound
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 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
The AI-driven market in May was readily apparent in the breakdown of best performing sector ETFs, according to data compiled by Bespoke Investment Group.
On the U.S. equity side, the Technology Select Sector SPDR Fund (XLK) had a total return of 8.9% last month, while the Invesco QQQ Trust (QQQ) gained 7.88%.
On the opposite side of the spectrum, the iShares Select Dividend ETF (DVY) fell more than 7%, while energy (XLE) dropped 10%.
It was a rough month for international markets as well, with the All World ex-US (CWI) sinking 3.5%. Brazil (EWZ), India (PIN) and Japan (EWJ) were three country funds with modest gains. Japan's market was also upgraded by Credit Suisse on Thursday.
— Jesse Pound
After months of being on the sidelines, retail investors appear to be coming back into stocks, with Vanda Research data showing they recently purchased nearly $1.5 billion in U.S. equities.
"After sitting broadly on the sidelines since the end of February, retail investors appear to have bought Wednesday's relatively small dip in equity markets with conviction," Vanda senior vice president Marco Iachini wrote. "One day does not a trend make, but it does make us wonder if retail traders are on the precipice of joining this equity rebound, at last. We believe there's a growing chance they will."
— Fred Imbert
Microsoft signed a deal earlier in 2023 to invest potentially billion of dollars in cloud-computing startup CoreWeave over several years, CNBC learned from people with knowledge of the matter.
CoreWeave offers Nvidia graphics cards for other companies to rent. The deal ensures that OpenAI would have sufficient computing power going forward. CoreWeave announced on Wednesday it had raised $200 million
Microsoft shares were up almost 1% Thursday afternoon.
— Hakyung Kim, Jordan Novet
So long as the S&P 500 closes anywhere above this past Tuesday's close of 4205.45, the benchmark U.S. stock index will have closed at its highest point in almost 10 months — since August 19, 2022, to be exact, when the index ended the day at 4,228.48.
In the event the S&P 500, which reached an intraday high of 4223.20 in mid-afternoon trading Thursday, up more than 1%, closes above 4,228.48, it will end the day at the highest point since August 18, 2022 — when it closed at 4,283.74.
The S&P 500 is only 2.4% below its 52-week high, according to FactSet data, but almost 21% above its 52-week low — not including reinvested dividends.
— Scott Schnipper
Analysts at firms including JPMorgan Chase, Bank of America and Morgan Stanley are growing concerned on Advance Auto Parts after weak quarterly results on Wednesday. Shares slid 4.8% on Thursday, notching a new low not seen since the early 2010s.
All three firms downgraded the stock on Thursday, and pointed to potential future headwinds as the company also tries to find a suitable chief executive.
"1Q's results and guidance cut (after providing its outlook mid-quarter on Feb 28) suggests management over-earned last year as it sought to control the controllables and deliver what their investor targets emphasized (i.e., price and structural margins, respectively)," JPMorgan analyst Christopher Horvers said.
Read the full story here.
— Brian Evans
Here are some of the names making the biggest moves in midday trading:
To see more stocks making midday moves, read the full story here.
— Michelle Fox
Energy stocks led the S&P 500 higher on Thursday.
The sector was the highest performing of the 11, up 2.1% compared with a 0.9% gain for the overall index. Schlumberger N.V. and Baker Hughes led the sector's ascent with jumps greater than 5%.
But not all sectors were rising with the broader index. Consumer staples was down 0.1%, while utilities dropped 1.2%.
— Alex Harring
Philadelphia Federal Reserve Patrick Harker said Thursday he thinks the central bank is nearing the point when it can stop raising interest rates.
"I do believe that we are close to the point where we can hold rates in place and let monetary policy do its work to bring inflation back to the target in a timely manner," he said in prepared remarks for a speech in Philadelphia.
Harker is a voting member this year of the rate-setting Federal Open Market Committee.
—Jeff Cox
The market somewhat muted start to the new month comes as investors digest a "mountain of information," according to Adam Crisafulli of Vital Knowledge.
"On the macro front, things are bullish given the inflation shortfall in Europe (the Eurozone CPI) and the US (the huge drop in the prices paid part of the manufacturing ISM)," he wrote. "While the macro backdrop is favorable, company-specific news was more mixed, with some big earnings disappointments in retail (DG, M, and VSCO) and several underwhelming tech releases (CRM, CRWD, and OKTA)."
— Fred Imbert