Stocks mixed as investors absorb slate of fresh economic data

Investors analyzed new data about the state of economy and mixed the stock market Thursday morning.

The gross domestic product (GDP), the broadest measure for economic output, increased by 2% in the first three months of the year. According to Refinitiv, this is well above the 1.4% economists predicted. This was the third revision and was significantly higher than the previous revision of 1,3%.

In the latest sign of the market's resilience, initial jobless claims dropped last week to 239,000. According to Refinitiv, economists had expected 265,000 first claims.

Bank stocks also rose on Wednesday after the Federal Reserve announced that it had released the results of its annual stress test for banks. The Fed said the biggest US banks were equipped with systems to continue lending even in a severe recession.

The 23 banks that were required to pass the Fed exam this year performed better than last year, despite having to face a worse-case scenario. JPMorgan Chase's shares rose by 2.2%. Wells Fargo's gained 3.2%. Citigroup increased 0.4%.

Overstock.com's shares jumped 20.6% following a court's approval of the company's purchase of Bed Bath & Beyond for $21.5 million. Overstock.com also announced that it would assume the name acquired by Bed Bath & Beyond.

The Dow Jones rose by 166.38 or 0.49 percent.

The S&P 500 rose by 0.22%.

The Nasdaq Composite fell by 0.03%.

1 hr 35 min ago

In May, Pending Home Sales fell more than expected

The National Association of Realtors released data on Thursday showing that US pending home sales fell more than expected in the month of May.

The index fell 2.7% in April to 76.5. According to Refinitiv's consensus estimates, economists expected a 0.5% drop.

The pending home sale index is a future-looking indicator that takes into account signed contracts for the purchase of a house rather than actual sales, which are included in the existing home sale index.

The index has declined three months in a row now, following May's plunge and the downward revision of April's reading.

The number of pending transactions was down by 22.2%. The number of transactions in all four US regions decreased from one year to the next.

Lawrence Yun, NAR's Chief Economist, said that despite the slowdown in pending contracts, the housing market was resilient, with three offers on each listing. "The lack housing inventory is preventing housing demand from fully being realized."

A reading of 100 corresponds to the average contract activity in 2001, the first year that the NAR examined. The volume of existing homes sales in 2001 was between 5 and 5.5 million. This range is considered normal by the US population.

The US housing market was on a roller coaster ride for the past two decades. Home sales and prices rose in response to the pandemic, but as mortgage rates increased, closings dropped and prices began to fall.

In recent weeks mortgage rates have been falling. The 30-year fixed rate mortgage averaged 6.67% in the week ended June 22.

The latest rates are released on Thursday at 12 noon Eastern.

2 hr and 23 min ago

The US economy is growing faster than originally estimated

Commerce Department data released on Thursday showed that the US economy grew at a faster rate than was previously thought in the first quarter of this year.

The gross domestic product (GDP), the broadest measure for economic output, grew by an annualized 2% rate in the first three months, compared to the previous estimate of 1,3%. According to Refinitiv, this was also above the 1.4% expected by economists.

The final estimate by the department of GDP for the first quarter reflected an upward revision in exports, consumer expenditures, state and local government expenses, and investments from housing businesses such as landlords. New data revealed that Americans were spending more on services than goods. This included a surge in health care service spending. The latest estimate included data from the Commerce Department’s Quarterly Services Survey. Consumer spending is responsible for two-thirds (or about 2/3rds) of the economic output.

The revised trade flows had a positive impact on GDP. Exports increased more than originally estimated, while imports decreased. Residential fixed investments -- expenditures from housing businesses and landlords -- were less detrimental to GDP. Nonresidential business cut back on purchases of equipment more than reported previously.

The US economy is in better shape than was previously believed, thanks to the resilient US consumer, although economists claim that momentum has slowed down in recent months.

Gregory Daco is the chief economist of Ernst & Young. In an analyst note, he wrote: 'While consumers still spend, they are exercising greater discretion as lingering prices and Federal Reserve's tightening cycles take their toll.' We still think a recession will happen, but our odds have been lowered to 55%. If it does, it would be unique.

The Fed held its federal funds rate at a range between 5-5.25% in the first month of this year, but most officials anticipate that rates will be raised two more times during this year to effectively tamper down any remaining inflationary pressures.

The banks are tightening lending standards. Inflation is still above the Fed's target of 2%. Student loan payments will resume later this year. And the labor market has been steadily cooling. The future is a difficult one for consumers, but economists like Fed Chair Jerome Powell have praised the US economy's resilience.

Consumers may spend more to make up for lost time and to secure purchases that they were previously unable to.

Bill Adams, Chief Economist at Comerica Bank told CNN that consumers who have discretionary funds to spend are spending them on autos which were not available for the past two years due to the chip shortage. They also use them to pay for services.

1 hr 35 min ago

Fed Chair Powell: After recent bank failures, stronger supervision and regulation is needed

The American banking system has become more resilient since safeguards were implemented following the Great Recession. However, the failures of three US banks as well as the collapse of Credit Suisse show that we should "not get complacent", said Federal Reserve Chair Jerome Powell on Thursday.

Powell, in a speech delivered at a conference on financial stability in Madrid, Spain, stated that the Fed should strengthen its oversight of financial institution in light of recent bank failures.

Powell, in prepared remarks, said that "these events indicate a need for strengthening our supervision and regulatory of institutions the size of [ Silicon Valley Bank]". "I am looking forward to evaluating such proposals and implementing them when appropriate."

Powell said that the banks and the regulations have been strengthened since the financial crisis of 15 years ago. This resilience, which Powell credited partly to regulatory reforms in the financial sector, allowed it to withstand an "unprecedented" shock in 2020, the pandemic.

Powell stated that it is difficult to resist our natural tendency to fight the previous war. In 2008, banks were under pressure due to large credit losses and lack of liquidity. In the early days, such losses seemed possible. However, they did not come to pass.

Powell stated that the failure of Silicon Valley Bank as well as Signature Bank and First Republic Bank revealed weaknesses. SVB was vulnerable due to interest rate exposure, a high reliance on uninsured deposit and the fact that bank runs can now be instantaneous.

He said that the bank failures and runs in 2023 were painful reminders of how we can't predict every stress that will come about with time and luck. "We must therefore not become complacent regarding the resilience of the financial system."

3 hr 39 minutes ago

The number of initial jobless claims dropped last week

According to Department of Labor statistics released on Thursday, there were 239,000 new claims for unemployment benefits during the week ending 24 June. This is down by 26,000 from previous weeks' revised upwardly total.

According to Refinitiv, economists expected 265,000 initial claims.

The number of continuing claims (which are those filed by people who receive unemployment benefits longer than one week) decreased to 1.742 millions for the week ending June 17 from the previous week's revised figure of 1.761million. According to Refinitiv, economists expected 1.765 millions continuing claims.

Labor Department data show that weekly unemployment claims are below historical averages. In the decade prior to the pandemic, the average number of claims per week for unemployment benefits was 311,000.

According to data released on Thursday, the four-week moving median for initial claims increased in recent weeks and now stands at 257,000 claims. According to the Labor Department, this is the highest average level since November 2021.

4 hr 32 min ago

Stock futures rose Thursday as traders prepared for a series of economic data

US stock futures rose Thursday morning, after Jerome Powell, the Federal Reserve chairperson made more public remarks and following a number of economic reports.

Dow futures rose 100 points or 0.3%. S&P futures increased by 0.3%, while Nasdaq composite futures climbed 0.4%.

The stock market ended Wednesday with mixed results after Powell reiterated the central bank's hawkish position against inflation.

Powell, who was part of a panel with other central bankers from around the world, acknowledged that the Fed had raised interest rates rapidly over the last year.

He said that the high unemployment rate and persistently high inflation suggest more rate increases are coming, even in a back-to-back fashion.

Powell said, 'I would not take the possibility of moving between consecutive meetings out of the equation at all.'

According to the CME FedWatch tool, traders now expect a Fed hike in July.

4 hr 30 min ago

Fed's stress tests results reveal banks' resilience in the face of recent crisis

Federal Reserve's annual test of bank resilience revealed that the largest US banks are well-prepared to weather a severe economic downturn and continue lending to businesses and households.

This year, the Fed's stress test was given extra weight after the collapse of US banks caused shockwaves throughout the banking system.

The 23 banks that were required to take this year's Fed exam did better than they did last year, even though the worst-case scenario was more painful.

In the worst-case scenario, banks would still be above their minimum requirements. However, they will lose $541 billion collectively. The capital ratios would fall by 2.3%, to 10.1%. This is more than twice the required amount.

The tests conducted last year on smaller banks, who are only tested every two years, showed that they would lose $612 Billion and their capital ratios will decline by 2,7% to 9,7%.

4 hr and 30 min ago

The Fed is still concerned about the robust job market

In recent speeches, some Fed officials made it clear that inflationary pressures continue. They cited core inflation which excludes volatile prices for food and gasoline, as not slowing down as quickly as overall inflation.

Jerome Powell, Federal Reserve chair, reiterated this sentiment at a conference of central bankers in Sintra, Portugal, on Wednesday. He pointed out that services inflation, which includes labor intensive businesses like restaurants and healthcare facilities, remains stubbornly high.

Powell stated that "Labor costs really are the most important factor in many parts of this sector." Powell said that "we need to see more alignment between supply and demand on the labor market, and a softerening of labor market conditions" so that inflationary forces in this sector can begin to subside.

In a paper often cited by former Fed Chair Ben Bernanke, he argued that labor market had a small but persistent impact on inflation, which could only be corrected by a further slowdown in the economy. This makes the case for further rate increases.

In recent months the labor market has been remarkably stable, consistently defying expectations. In May, employers added 339,000 jobs. The unemployment rate rose to 3.7%.

4 hr and 30 min ago

Fed Chair Powell does not rule out consecutive rate hikes

Jerome Powell, Federal Reserve chair, reiterated Wednesday his hawkish opinion that the central banks is not done with tackling inflation and may even implement successive rate increases at the next monetary policy meeting.

Powell, speaking at a panel of central bankers hosted by the European Central Bank, said: "If you take a look at the numbers over the past quarter, you will see that the growth is higher than expected, the labor market tighter than anticipated, and the inflation rate higher than expected."

This tells us the policy may not have been restrictive enough or for long enough.

Powell said that officials haven't yet decided when and how they will increase rates. This includes whether they will do it every meeting or in back-to-back meetings.