Closing Market Update: S&P 500 Starts New Bull

Published as of: June 8, 2023, 4:54 p.m. ET

(Thursday market close) Major U.S. stock indexes were generally higher Thursday, with the broad  S&P 500^® Index (SPX) entering bull market territory as it closed 20% above its October low, as large-cap stocks including Amazon (AMZN), Apple (AAPL), and Tesla (TLSA) continued to power ahead. However, small-caps lagged, as investors await monthly inflation numbers and a Federal Reserve policy meeting next week.

Investors continued to grapple with the direction of the economy and interest rates in response to some potentially conflicting signals. On one hand, a larger-than-expected increase in weekly jobless claims reported Thursday would seem to argue in favor of the Fed leaving its benchmark lending rate unchanged at its upcoming meeting. On the other hand, a surprise rate hike from the Bank of Canada on Wednesday raised concerns the Fed might also catch the market off-guard with another hike. For now, at least, the consensus expectation is for the Fed not to follow Canada's lead.

"This looks a lot like a 'duck' market: calm on the surface amid strength in mega-cap stocks, but 'stress' below the surface, with cyclicals and small-caps still lagging," analysts with the Schwab Center for Financial Research say in a report. Mega caps could eventually "take a breather (not a fall), while the rest of the market catches up," they add.

Here is where the major benchmarks ended:

• The S&P 500 Index was up 26.41 points (0.6%) at 4293.93; the Dow Jones Industrial Average (DJIA) was up 168.59 (0.5%) at 33,833.61; the Nasdaq Composite (COMPX) was up 134 points (1.02%) at 13,238.52.
• The 10-year Treasury note yield (TNX) was little changed at 3.714%.
• Cboe's Volatility Index (VIX) was down 0.29 at 13.65.

Retail and Consumer Discretionary stocks led gains Thursday among S&P 500 sectors, while technology stocks were also strong. Small-cap stocks eased, but the Russell 2000 (RUT) is still up 2.7% for the week. Energy stocks slumped after reports of a possible nuclear deal between the U.S. and Iran sent WTI crude oil futures down nearly 2%. Volatility fell near a two-year low.

The following companies reported earnings over the past day or had news-driven stock price moves:

• Amazon shares rallied after reports that Wells Fargo initiated coverage of the company with an "overweight" rating, saying the ecommerce company's shares could rally more than 30% as it transitions to its regional fulfillment model. Amazon's shares rose 2.5%.
• Adobe (ADBE) announced it is offering its artificial intelligence tool, Firefly, to large business customers. Its shares rose nearly 5%.
• Carvana (CVNA) reported a stronger-than-expected outlook for the current quarter, helping boost its shares nearly 57%.
• Fisker (FSR) shares were downgraded by Wolfe Research, which cited concerns over the automaker's competitiveness. Its shares fell 8%.
• T-Mobile (TMUS) shares were upgraded to "outperform" from "peer perform" by Wolfe Research, which said the company represents a buying opportunity following a run of poor performance. Its shares rose 3%.
• Warner Bros. Discovery (WBD) shares surged following reports of the departure of CNN CEO Chris Licht. Its shares rose 7%.

Treasury yields fell from two-week highs earlier this week after the Labor Department said weekly jobless claims rose 28,000 to 261,000, above a Briefing.com consensus figure of 237,000 and the highest since October 2021.

Market professionals are closely watching job market numbers and other economic signals for clues to the Fed's next moves. Next week will be a big one for interest rates and inflation: The policy-setting Federal Open Market Committee meets June 13–14, which will coincide with the Labor Department's June 13 release of the Consumer Price Index report for May and then the Producer Price Index report on June 14.

"One drop in initial jobless claims doesn't necessarily make a trend, but it's a sign that the labor market could be loosening," says Collin Martin, director of fixed income strategy at the Schwab Center for Financial Research. "We expect the Fed to skip a rate hike at next week's meeting, and we think the likelihood of a hike in July lower than the Fed funds future market is implying."

Collin notes the Bank of Canada's unexpected rate hike is unlikely to influence its U.S. counterpart.

Surprises from other central banks "shouldn't impact the Fed's decision next week," Collin adds. "The Fed will be data-dependent and won't necessarily hike just because other central banks hiked."

Late Thursday, the market saw a 72% probability of the Fed leaving rates unchanged at the June meeting, down from about 80% a week ago, according to the CME FedWatch tool. The market sees the odds of a hike at the Fed's July policy meeting at slightly higher than 50%.