U.S. stocks ended sharply higher Thursday, shrugging off a surprise profit warning from Microsoft (MSFT), as investors looked to Friday's May payroll report for firmer direction on markets heading into the final weeks of the quarter.
On Wall Street, the Dow Jones Industrial Average ended up 435 points, while the S&P 500 was up 76 points. The tech-focused Nasdaq, which is down 24.2% for the year, ended up 322 points, or 2.7%.
Stocks were first pushed lower by Microsoft's update, and then by comments from Federal Reserve vice-chair Lael Brainard, who told CNBC that 50 basis point rate hikes for September could still be on the table, given the unrelenting pace of consumer price increases.
Microsoft shares slumped at the open but ended up 0.8% on the session after the tech giant cut its near-term earnings forecast thanks in part to headwinds linked to the strength of the U.S. dollar.
In an end-May trading update published on its website, Microsoft said it sees current quarter revenues in the region of $51.94 billion to $54.74 billion, with operating income of between $20.6 billion to $21.3 billion. Earnings will likely come in between $2.24 and $2.32 per share, Microsoft said, down from its April estimate of $2.28 to $2.35 per share.
Markets found their footing in the early afternoon session, however, as the U.S. dollar gave back gains against its global peers and oil prices held steady following OPEC's monthly meeting in Vienna.
An otherwise solid reading for manufacturing activity in May, based on closely-watched ISM data published Wednesday, was marred by suggestions that factories will likely cut-back on hiring in the coming months as supply chain disruptions and input cost increases complicate production.
Payroll processing group ADP published its National Employment report this morning, with data showing a much smaller-than-expected private sector gain of 128,000, while weekly jobless claims showed an 11,000 decline, to 200,000, for the period ending on May 28.
Friday, of course, will see the release of the official May employment report, which is expected to show hiring slowed to a net 325,000 new positions, the weakest since February.
"Yesterday’s far stronger than expected ISM Manufacturing was one data point that helped treasury yields back higher, as well perhaps as the de facto start of Fed balance sheet reduction, or quantitative tightening," said Saxo Bank analysts. "Fresh highs in yields could put fresh pressure on global equity markets after their recent strong consolidation off the lows."
Benchmark 10-year note yields were trading at a near two-week high of 2.915% amid the faster inflation prospects and the start of the Federal Reserve's balance sheet run-off, which will dump $30 billion in Treasuries and $17.5 billion in mortgage bonds onto the market each month, while the U.S. dollar index slipped 0.7% against a basket of its global peers to 101.769.
Oil prices moved sharply lower in overnight trading, then reversed course, taking WTI crude close to $117 per barrel, following a recommendation from OPEC members to boost their monthly production quotas by 648,000 barrels per day in order to meet the 1 million barrel per day fall-off from Russia linked to western sanctions.
President Joe Biden is also reportedly prepared to fly to Riyadh as part of his effort to find relief for record high U.S. gasoline prices, which hit a fresh all-time peak of $4.71 per gallon last night, according to AAA data.
WTI crude futures for July delivery were marked $1.69 higher in New York trading at $116.95 per barrel while Brent contracts for the August, the global benchmark, jumped 74 cents to $117.04 per barrel.
In overseas markets, European stocks closed modestly higher, with the Stoxx 600 rising 0.57% in Frankfurt, while the region-wide MSCI ex-Japan index fell 0.8% in a follow-on move from last night's close on Wall Street.
Meta Platforms (FB) shares were one of the most active names, rising 5.6% as investors reacted to news that Chief Operating Officer Sheryl Sandberg, the social media group's second in command, will step down later this year.
Sandberg, who is widely credited with navigating Facebook's transition from a brand value to ad-generated revenue, served under CEO Mark Zuckerberg for fourteen years and was, in many respects, the professional public face of the social media giant.
GameStop (GME) shares, meanwhile, edged 0.25% higher after the video game retailer and meme stock favorite posted a wider-than-expected first quarter loss but noted solid gains from online sales.
Hewlett Packard Enterprise (HPE) was also on the move, falling 6.5% after the IT services posted modestly weaker-than-expected second quarter earnings and forecast muted near-terms sales growth.
On the upside, Ford Motor (F) rose 2.25% following a 'major economic announcement' from the carmaker prior to the start of trading as it looks to re-vamp its dealer network amid its ongoing challenge to Tesla's (TSLA) EV market dominance.
