U.S. stocks closed firmly higher Thursday, extending the Dow's winning streak to a fifth consecutive session, as investors weighed the impact of the Federal Reserve's inflation fight against a mixed of challenges facing the global economy.
Stocks were also unphased after the Commerce Department revised its estimate of first quarter GDP growth to show a 1.5% contraction, while continuing unemployment claims edged modestly higher, to 1.346 million for the week ending on May 14.
Minutes from the Fed's May 4 policy meeting, published yesterday afternoon, showed a broad consensus for 50 basis point rate hikes at meetings in June and July. However, participants also noted the possible need for faster and deeper moves -- a 'restrictive policy stance' -- that didn't completely eliminate market bets on a 75 basis point move at some point in the tightening cycle.
Set against a backdrop of surging inflation, China's ongoing Covid lockdowns, Russia's war on Ukraine and myriad supply chain disruptions, the Fed's aggressive rate signaling is seen as likely further blunt growth in a domestic economy that is already flirting with recession.
The Fed's assessment, however, is that by front-loading rate hikes in the summer "would leave the Committee well positioned later this year to assess the effects of policy firming."
That might leave the Fed with at least the option of a pause in rate hikes -- a so-called 'Fed Put' a view expressed earlier this week by Atlanta Fed President Raphael Bostic, who wrote that he intended to "proceed carefully in tightening policy", while being mindful of non-financial impacts and avoiding any "reckless" policy decisions.
"The Fed has carved a number of narrow paths due to their own prior actions," said Jason Brady, president & CEO at Santa Fe-based Thornburg Investment Management. One of the courses they are charting is an attempt to maintain credibility on fighting inflation while giving themselves flexibility later in the year."
"The fight-inflation-and-maintain-flexibility double play is behind Bostic’s Monday comment about a September 'pause'," he added. "This notion also popped up in some of (the Fed minutes) commentary."
European stocks were marked higher by the close of trading in Frankfurt, with the Stoxx 600 rising 0.78%, while the region-wide MSCI ex-Japan index gained 0.03% by the end of the session.
Benchmark 10-year Treasury bond yields -- which move inversely to prices -- rose 4 basis point lower in overnight trading to 2.747% as growth worries pushed investors into risk-free assets, while the U.S. dollar index, which tracks the greenback against a basket of six global currency peers, was marked 0.2% lower at 101.855 in early European trading.
On Wall Street, the Dow Jones Industrial Average closed 517 points higher while the S&P 500 gained 79 points by the end of the session. The tech-focused Nasdaq, which is down 27.8% for the year, added 305 points.
Nvidia (NVDA) shares were one of the more active names throughout the session, rising 5.1% after the semiconductor maker issued a muted near-term outlook for the sale of its gaming chips that took the gloss off a solid set of first quarter earnings.
Twitter (TWTR) shares moved 4.3% higher after Tesla (TSLA) CEO Elon Musk added another $6.25 billion in equity to the financing package in his $44 billion takeover bid.
Macy's (M) soared 19.3% after it posted better-than-expected first quarter earnings, while boosting its full-year profit guidance, as the retailer capitalized on retail demand despite what it called a "challenging operating environment."
Broadcom (AVGO) was also active, rising 13.6% after it agreed buy VMWare (VMW) in a cash-and-stock deal that would value the former cloud computing division of Dell Technologies (DELL) at around $61 billion.
Broadcom also pre-released its second quarter earnings, posting adjusted profits of $9.07 per share on revenues of $8.1 billion. The chipmaker added that it will maintain its current dividend policy of delivering 50% of its prior-year free cash flow to shareholders.
Apple Inc. (AAPL) gained 2.3% following a report that suggested the world's biggest tech company could keep production rates of its signature iPhone largely unchanged from last year.
Bloomberg News reported that Apple is likely to keep 2022 iPhone production levels at around 220 million units, a figure that matches last year's tally, as supply chain disruptions and China's Covid lockdown impact supply and slowing global growth and Russia's war on Ukraine dampen demand.
Snowflake (SNOW) shares plunged 10.4% after the cloud-based data-storage group posted its weakest rate of customer growth since going public two years ago.
Snowflake, whose Data Cloud business includes customers such as BlackRock (BLK) FactSet and Zillow (ZG), posted first quarter revenues of $422.4 million, an 85% increase from last year that topped Street forecasts, but noted that sequential customer growth to its suite of storage businesses was pegged at only 378, taking its overall total to 6,322.
