U.S. stocks advanced ahead of a second day of testimony from Federal Reserve Chairman
after he warned that rapidly rising interest rates threatened a recession.
The S&P 500 added 0.4% in early trading Thursday. The technology-heavy Nasdaq Composite Index rose 0.4% while the blue-chip Dow Jones Industrial Average also edged up 0.4%.
Investors have mostly shed riskier assets in recent days, prompted by growing concerns that efforts by the Federal Reserve to bring inflation under control will take a toll on the economy. Investors are growing less optimistic that the Fed can engineer a so-called soft landing, whereby interest rates rise to curb inflation without pushing the economy into a recession.
Mr. Powell acknowledged those risks in testimony to lawmakers Wednesday, saying that a recession was possible and that a soft landing for the economy would be “very challenging.” Mr. Powell is set to continue that testimony Thursday in front of a second group of lawmakers.
The S&P 500 closed down 0.1% Wednesday following Mr. Powell’s remarks, while the Dow Jones Industrial Average lost 0.2%.
“Markets are in a real state of flux right now,” said Stephen Innes, managing partner at SPI Asset Management. “I don’t think the market is moving into bullish territory by any means.”
Large technology companies were leading gains premarket, with
each up around 0.9%.
The Labor Department said 229,000 Americans applied for unemployment benefits last week. Jobless claims—one of the earliest indicators of weakness in the labor market—remain at historically low levels. A gauge of activity in the manufacturing and service sectors is due shortly after the opening bell.
In bond markets, Treasury yields declined for a second day though remained close to their highest level in more than a decade. The yield on the benchmark 10-year U.S. Treasury note fell to 3.099% from 3.155% on Wednesday. Bond yields fall as prices rise.
The U.S. dollar firmed, with the WSJ Dollar Index, which measures the currency against a basket of its peers, rising 0.1%.
In Europe, the pan-continental Stoxx Europe 600 was flat. Business surveys released Thursday showed Europe’s economy slowed sharply in June as soaring consumer prices undercut demand for a range of goods and services.
“Inflation is at the center of all this, but there is also fading growth, and interest rates are going up. All of that together is a horrible cocktail and you just need to step aside and wait for that to work itself out,” said Hani Redha, a portfolio manager at PineBridge Investments.
European gas prices jumped after Germany took a step closer to rationing gas by triggering the second step of an emergency plan to deal with curtailed Russian supplies. The region’s gas prices gained more than 5% to €134.25 a megawatt hour, their highest level since March.
Bitcoin rose 3.9% from its 5 p.m. ET level on Wednesday to $20,668.90. The cryptocurrency has steadied in recent days after a sharp selloff earlier in the month.
In commodity markets, oil prices wavered after sharp losses Wednesday. Brent crude, the international oil benchmark, weakened 0.5% to $108.16 a barrel. Other commodities whose demand is closely correlated to the economy also slipped. Copper prices in London fell 2.6% to $8,555.50 a metric ton.
Soaring energy prices have been a key contributor to the multidecade high inflation currently roiling global economies. Concern that a recession would see demand for oil fade was prompting investors to sell the commodity, said Mr. Redha.
“I have said for a while there will be no bottom in equities without also a sustainable top in oil prices and bond yields,” he said. “I think that is potentially under way.”
In Asia, stock markets mostly rose. In Hong Kong, the Hang Seng Index rose 1.3% while in mainland China the Shanghai Composite Index rose 1.6%. In Japan, the Nikkei 225 added 0.1%.
Write to Will Horner at firstname.lastname@example.org
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