Nasdaq, S&P 500 notch records even as elevated jobless claims

U.S. stock indexes mostly closed slightly higher Thursday, with the S&P 500 index and Nasdaq Composite posting new records, even as investors saw a stubbornly high level of jobless benefit claims in the latest week, underlining the ongoing challenges to the U.S. economic recovery.

Still, all three major benchmarks are on track for gains this week and for February to date, with the small-cap Russell 2000 outpacing the S&P 500 for the week, the month and year.

What are major indexes doing?
  • The Dow Jones Industrial Average DJIA, -0.02% fell 7.10 points, or less than 0.1%, to 31,430.70.
  • The S&P 500 index SPX, +0.17% rose 6.50 points, or 0.2%, to 3,916.38, booking a record.
  • The Nasdaq Composite Index COMP, +0.38% gained 53.24 points, or 0.4%, to 14,025.77, setting a new all-time high.

The Dow eked out a gain Wednesday to close at a record, while the S&P 500 closed fractionally lower for a back-to-back loss and the Nasdaq Composite snapped a four-day winning streak that had taken it to a series of records. The small-cap Russell 2000 RUT, +0.13% also pulled back from record territory, falling 0.7% to end a seven-day streak of wins.

Read: A small-cap stock-market breakout is leaving the S&P 500 in the dust — here’s what it means for the rally

What’s driving the market?

A weekly report from the Labor Department showed that U.S. initial jobless claims in states fell to 793,000 but new claims from two weeks ago were raised to 812,000 in early February, leaving the job market showing little improvement. Weekly claims were expected to total 760,000 last week, according to economists surveyed by Dow Jones.

Continuing claims for joblessness fell by 145,000 but remained at an elevated 4.5 million, underscoring comments made by Federal Reserve Chairman Jerome Powell on the challenges the labor market faces amid the pandemic.

“It does seem like we’re treading water somewhat on the employment front,” wrote Mike Loewengart, managing director, investment strategy at E-Trade Financial.

“The jobs numbers only compound Powell’s remarks from yesterday on the challenges ahead to get the labor market where it was. Jobs numbers haven’t necessarily been a market mover during the pandemic, but stimulus progress has. And the continued stagnation only underscores the need for more relief,” Loewengart said.

Expectations that Congress will deliver another fiscal stimulus package near in size to President Joe Biden’s $1.9 trillion proposal has been a major driver of a global equity rally, analysts said. Meanwhile, subdued U.S. inflation data on Wednesday helped blunt fears that a surge in prices could prompt the Fed to pull back on monetary stimulus sooner than expected.

“In the near-term, inflationary concerns appear to be modest with both the headline and core well below the Committee’s 2% target, but longer-term consequences from massive government spending are bound to have unintended – and lasting – consequences,” said Lindsey Piegza, chief economist at Stifel.

Powell on Wednesday told the Economic Club of New York that the Fed won’t slow its asset purchases until the central bank’s 2% inflation target is exceeded.

A declining pace of COVID-19 infections and the continued rollout of vaccines has also bolstered investor appetite for stocks, analysts said.

Corporate earnings reporting season also remains under way, with results largely topping admittedly low-bar estimates. About 80% of the big firms that have already reported their latest results beat projections and their aggregate earnings in the three months to December have surpassed estimates by over 17%.

A busy week of earnings reports continues on Thursday. PepsiCo PEP, -1.98%, Kraft Heinz KHC, +4.87% and Kellogg K, -1.91% reported before the market opened. Disney DIS, +0.67% and Expedia EXPE, +0.68% are due to report after the bell on Thursday.

Also, shares of cannabis-related companies were in the spotlight after investors on Reddit’s WallStreetBets forum, the same group that stoked a spike in shares of videogame retailer GameStop Inc. GME, -0.20%, encouraged each other to snap up shares.

Which companies are in focus?
  • PepsiCo Inc. PEP, -1.98% shares fell 2% after the beverage and snack company early Thursday reported fourth-quarter profit that topped expectations, revenue that rose above forecasts and raised its dividend. 
  • Shares of Kraft Heinz Co. KHC, +4.87% ended up 4.8% after the company delivered results that beat Wall Street expectations and said it had reached an agreement to sell its Planters nuts business to Hormel Foods Corp. HRL, -3.31%  in a cash deal valued at $3.35 billion. The news was first reported by The Wall Street Journal earlier this month. Hormel shares were up 3.3%.
  • Shares of Uber Technologies Inc. UBER, -3.91% fell 3.9% after the ride-hailing company late Wednesday said fourth-quarter gross bookings rose 16% from the previous quarter, but its revenue fell short of expectations.
  • Zynga Inc. ZNGA, +7.35% shares rose 7.4% after the gaming company late Wednesday reported a surge in revenue and bookings.
  • Bloom Energy Corp. BE, -3.28% shares slid 3.4% after the clean-energy company’s bottom-line results late Wednesday fell short of Wall Street expectations.
  • Shares of iRobot Inc. IRBT, +1.31% rose 1.3% after the robot maker late Wednesday reported fiscal fourth-quarter results.
  • Best Buy Co.  BBY, +0.66% notified workers this week that it was cutting some jobs at its big-box stores, The Wall Street Journal reported, citing people familiar with the situation, in response to the shift to online shopping. The retailer’s shares rose 0.7%.
  • Shares of dating-app operator Bumble Inc BMBL, +63.51% surged 63% after its initial public offering.
How are other assets faring?
  • The yield on the 10-year Treasury note TMUBMUSD10Y, 1.166%  rose 0.6 basis point to 1.157%, after earlier in the week eyeing a key threshold at 1.2%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, +0.04%, a measure of the currency against a basket of six major rivals, was up less than 0.1%.
  • Oil futures ended an 8-day winning streak, with the U.S. benchmark CL.1, -0.55%  down 44 cents, or nearly 0.8%, to settle at $58.24 per barrel. Gold futures GC00, -0.03%  lost $15.90, or 0.9%, to settle at $1,826.80 an ounce.
  • The pan-European Stoxx 600 Europe index SXXP rose 0.5% and London’s FTSE 100 UKX finished up less than 0.1%.
  • In Asia, Hong Kong’s Hang Seng Index HSI gained 0.5%, but other major markets were closed ahead of the Lunar New Year holiday.

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