Closing Market Update

(Thursday market close) The S&P 500^® index (SPX) gained Thursday for the fifth trading day out of the past six and closed at its highest level in more than a month after further signs of slowdown in the job market pushed Treasury yields lower amid growing confidence in prospects for Federal Reserve interest rates cuts this year.

Early Thursday, the Labor Department reported Weekly Initial Jobless Claims jumped 22,000 to 231,000, up from 209,000 the previous week and the highest weekly figure since August. Claims were expected to rise only about 4,000. The claims number followed a weaker-than-expected Nonfarm Payrolls report last week that helped restore ideas Fed rate cuts are still on the table this year.

The Dow Jones Industrial Average^® ($DJI) posted its seventh consecutive gain and ended at a five-week high behind a 2.5% surge in Home Depot (HD). The big home improvement chain is expected to report quarterly numbers Tuesday, kicking off the unofficial start to the retail earnings season.

Economic data is starting to reflect a slowing economy that may have hit an inflection point, shifting from stronger-than-expected numbers in the first quarter to softer numbers in the second quarter. If softer numbers are accompanied by easing inflation, the Fed may gain the confidence it needs to lower benchmark rates for the first time in over four years, according to analysts.

Next week's Consumer Price Index (CPI) and Producer Price Index (PPI) reports for April loom as key market influencers.

Here's where the major benchmarks ended:

• The S&P 500 index gained 26.41 points (0.5%) to 5,214.08; the Dow Jones Industrial Average rose 331.37 points (0.9%) to 39,387.76; the Nasdaq Composite^® ($COMP) advanced 43.51 points (0.3%) to 16,346.26.
• The 10-year Treasury note yield (TNX) lost more than 2 basis points to 4.459%.
• The Cboe Volatility Index^® (VIX) fell 0.31 to 12.69.

Interest-rate-sensitive sectors, such as real estate and utilities, were among the strongest performers Thursday. Energy shares were also strong after WTI Crude Oil (/CL) futures rose for a second straight day after sinking to a two-month low earlier this week. Semiconductor shares were under pressure after disappointing revenue guidance from chip designer Arm Holdings (ARM) sent its shares down 2.3%.

The following companies had stock price moves driven by analyst ratings, quarterly earnings, or other news:

• Airbnb (ABNB) dropped almost 7% after the vacation rental platform beat analysts' expectations for its first quarter but also provided disappointing revenue guidance for the second quarter. 
• Applovin (APP) surged more than 14% after the mobile technology company reported stronger-than-expected first-quarter earnings. 
• Cheesecake Factory (CAKE) jumped 6.2% after the restaurant chain's first-quarter earnings topped expectations. 
• Planet Fitness (PLNT) rallied 5.6% after the company's quarterly results surprised to the upside. 
• Warby Parker (WRBY) gained 18% after the eyewear maker reported a smaller-than-expected quarterly loss. 
• Yeti Holdings (YETI) surged 13% after the maker of pricey coolers and travel mugs reported better-than-expected first-quarter results. 

First-quarter earnings season is winding down, but the next few weeks still include quarterly results from some of the largest retailers. In addition to Home Depot's expected results Tuesday, Walmart (WMT), the biggest U.S. retailer by sales, is scheduled to report next Thursday.

Last Friday's payrolls report appeared to spark renewed enthusiasm among investors who'd grown increasingly discouraged by a series of hotter-than-expected inflations readings during the first three months of the year. The report included slower-than-expected wage growth during April, which some viewed as an encouraging sign that inflation may resume the mostly downward path it held in 2023.

The S&P 500 index is on track for its third consecutive weekly advance and ended Thursday just 1% below a record intraday high of about 5,265 on the last trading day of March.

Resurgent inflation forced investors to sharply rein in expectations for multiple Fed rate cuts, and even some Fed leaders have suggested the central bank may not lower rates at all this year. Many analysts now expect two cuts this year, with the first likely in September.

Late Thursday, traders priced nearly 67% odds the fed funds rate will be at least a quarter-point lower following the Federal Open Market Committee's (FOMC) September meeting, based on the CME FedWatch Tool. Traders also saw a 92% chance the funds target will be held unchanged following the FOMC's June 11 – 12 meeting and a 67% chance for no change following the committee's July meeting, based on the FedWatch Tool.

Investors now await Tuesday's PPI report, followed by the CPI update Wednesday. Analysts expect PPI rose 0.2% in April versus March in both overall and core rates. The core rate removes volatile food and energy prices.

"The inflation reports are expected to indicate some modest improvement, with core CPI coming in at 3.4% year over year," according to Kathy Jones, Schwab's chief fixed income strategist.