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Stock Market News for Apr 14, 2023

Wall Street closed sharply higher on Thursday, riding on encouraging economic data. Producer-side inflation’s coming in well below expectations and jobless claims numbers suggesting a loosening labor market indicated that the central bank’s policies are taking effect, lifting investor mood. All three major indexes ended firmly in the green.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) gained 1.1% or 383.19 points to close at 34,029.69. Twenty-eight components of the 30-stock index ended in positive territory, while two ended in negative.

The S&P 500 advanced 1.3% or 54.27 points to close at 4,146.22. Ten of the 11 broad sectors of the benchmark index ended in positive territory. The Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC) and the Technology Select Sector SPDR (XLBK) gained 2.2%, 2.1% and 1.9%, respectively, while the Real Estate Select Sector SPDR (XLRE) lost 0.3%.

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The tech-heavy Nasdaq added 236.94 points, or 2%, to finish at 12,166.27, led by mega-cap tech stocks.

The fear-gauge CBOE Volatility Index (VIX) was down 6.8% at 17.80. A total of 10.4 billion shares were traded on Thursday, lower than the last 20-session average of 11.5 billion. Advancers outnumbered decliners on the NYSE by a 2.71-to-1 ratio. On the Nasdaq, a 2.55-to-1 ratio favored advancing issues.

PPI Numbers Come in Significantly Lower

According to a report by the Labor Department released on Thursday, the producer price index (PPI) for final demand dropped 0.5% in March. Data for February was revised to unchanged instead of falling 0.1%, as previously reported. This unexpected negative return is being attributed to the fall in gasoline prices.

Core PPI, which excludes the food and energy prices, rose 0.3% after a similar gain in February. In the 12 months through to March, PPI advanced 2.7%, its smallest year-on-year rise in over two years. This follows a 4.9% annual advance in February.

Coupled with the CPI report from the earlier session, which had shown commodity prices barely going up in March, this latest producer-side inflation report became a reason to cheer for investors. This is because these economic numbers are now definitively suggesting that the stringent Fed policy measures have started taking effect and are slowing the economy. That, in turn, means that the central bank would be taking stock and contemplating on whether to loosen its grip.

In recent sessions, the market has been pricing in a 25 bps hike from the Fed’s May meeting. However, the latest inflation numbers and other economic indicators have suggested that even a rate pause may be in the cards. As has been the case over the past year or so on gaining sessions, mega-cap growth stocks like tech and consumer discretionaries made the most of the day’s spoils.

Consequently, shares of Apple Inc. AAPL and Amazon.com, Inc. AMZN advanced 3.4% and 4.7%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Initial Claims Point Toward a Loosening Labor Market

The Labor Department said on Thursday that initial jobless claims rose to 239,000, increasing 11,000 for the week ending Apr 8, from the previous week's unrevised level. The four-week moving average increased to 240,000, marking a rise of 2,250 from the previous week’s unrevised average of 237,750.

Continuing claims came in at 1,810,000 for the week ending Apr 1, decreasing 13,000 from the previous week’s unrevised level. The 4-week moving average came in at 1,813,500, an increase of 9,500 from the previous week's unrevised average. This is the highest level for this average since Nov 13, 2021, when it was 2,007,000.

With job-seekers increasingly applying for unemployment benefits, it may be surmised that the labor market is gradually losing steam. Market participants slipped back into the “bad news is good news” mode on the release of this report and are currently hedging their bets in favor of the Fed taking these labor numbers into account when they meet next in May for their policy planning.

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