S&P 500 rises to retake record at the open, wiping out last week’s Fed swoon

S&P 500 rises to retake record at the open, wiping out last week’s Fed swoon

The S&P 500 climbed on Thursday, surpassing its record high set a week ago as the market fully recovered losses triggered by the Federal Reserve’s surprise policy pivot.

The broad equity benchmark rose 0.5% to hit an all-time high, retaking its previous record on June 14. The Dow Jones Industrial Average added 207 points, or 0.6%. The Nasdaq Composite jumped 0.6% to reach another record.

A broad group of stocks gained to push the benchmarks to new highs. Tesla added more than 2%, while GM and Caterpillar each gained about 1%.

Data out Thursday showed jobless claims totaled 411,000 for the week ended June 19, higher than an estimate of 380,000 from economists polled by Dow Jones.

Traders are also monitoring infrastructure package negotiations. A bipartisan group of Senators that have made progress on a plan will meet President Joe Biden at the White House Thursday. The lawmakers have worked for weeks to craft a roughly $1 trillion package that could get through Congress with support from both parties. Republicans have fought the president’s proposal to hike the corporate tax rate to 28% from 21%

Bank shares gained ahead of the Fed’s annual bank stress test results, which are scheduled for release after the bell on Thursday. The test examines how banks fare during various hypothetical economic downturns. Banks were forced to freeze dividends and stop buybacks during the pandemic. These results should give them the greenlight to eventually raise payouts. Goldman Sachs shares rose about 1%.

Despite Wednesday’s hiccup, the three major indexes are up more than 1% this week, rallying from a sell-off last week after the Fed heightened inflation expectations and forecast rate hikes as soon as 2023. Comments from Fed Chair Jerome Powell during a Congressional testimony Tuesday reiterated that inflation pressures should be temporary, which seemed to soothe market sentiment.

“Beneath the optimism, markets are at risk of becoming complacent – and vulnerable to shocks. Any signal that interest rates and bond yields could rise, even in the absence of pronounced inflationary pressure, could shatter market exuberance,” Gaurav Mallik, chief portfolio strategist at State Street Global Advisors, said.

“Central banks will walk a tightrope between allowing the economy to run hot – which history has shown to be a bad idea – and managing inflation risk,” he added.

— CNBC’s Hugh Son contributed reporting.

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