U.S. stocks rose on Thursday, with advances in Apple (AAPL) shares helping to buoy the indices.
The S&P 500 (^GSPC) rose 1.09%, or 30.72 points, as of market close. The Dow (^DJI) rose 0.85%, or 217.69 points. Apple’s stock led advances, with shares trading above their 200-day moving average after Wall Street firm Needham upgraded the stock to Strong Buy from Buy and raised its price target to $225 from $180. The Nasdaq (^IXIC) rose 1.42%, or 109.99 points.
Equities rebounded after the Federal Reserve’s even more dovish than expected policy decision Wednesday, which initially sent the three major indices higher before they reversed course. The Federal Open Market Committee (FOMC) decided to keep benchmark interest rates unchanged at between 2.25% and 2.5% and signaled no rate hikes in 2019. Seven officials see the Fed on pause at least through the end of 2020.
The shallower dot plot, or chart showing near- and long-term target rate projections for each of the FOMC members, was driven by the Fed’s softening view of the economic outlook.
Although markets normally respond to Fed accommodation by bidding up stocks and other high-yielding assets, investors appeared to grow skittish about the prospect of sluggish worldwide growth, with the S&P 500 and Dow ending lower on Wednesday. The Fed brought down its median projection for GDP Growth to 2.1% in 2019, from 2.3% previously.
“Rather than a shift in the Fed’s reaction function towards engineering higher inflation, this reassessment was driven primarily by a downgrade to the Fed’s baseline economic forecast,” Matthew Luzzetti, chief U.S. economist for Deutsche Bank, wrote in a note.
“While Chair Powell emphasized the positive aspects of the outlook in the press conference and no officials see the Fed cutting rates from current levels over the forecast horizon, it is clear that the committee no longer has a strong tightening basis and patience will remain the order of the day for some time,” Luzzetti added.
U.S. Treasury yields were mixed after the Fed said Wednesday it plans to slow its roll-off of holdings of Treasury securities starting in May, and plans to stop the reduction entirely by the end of September.
The yield on the 10-year note, which moves inversely to the price, was unchanged at 2.537% as of 4:02 p.m. ET. The yield on the 2-year note rose by 0.8 basis points to 2.408%.
Other major central banks have also eased up on their monetary policy direction amid perceived economic risks. The Bank of England on Thursday decided to keep its benchmark interest rate unchanged at 0.75%, as firms prepare for a potentially chaotic UK departure from the European Union (EU).
“Shifting expectations about the potential nature and timing of the United Kingdom’s withdrawal from the European Union have continued to generate volatility in UK asset prices, particularly the sterling exchange rate,” the BOE’s Monetary Policy Committee wrote in a statement Thursday.
“Brexit uncertainties also continue to weigh on confidence and short-term economic activity, notably business investment,” the central bank said. “Employment growth has been strong, although survey indicators suggest that the outlook has softened.”
UK prime minister Theresa May earlier this week sent a letter to EU leaders seeking an extension to Brexit through June, after British lawmakers last week voted to delay and avoid a no-deal departure. These decisions must still be approved by the EU, however, leaving the potential of a disorderly breakup still on the table.
STOCKS
Biogen (BIIB) shares plummeted more than 29% as of market close after the company announced it was ending its trial of Alzheimer disease drug aducanumab, which analysts had expected to be a best-seller.
The company said in a statement that the decision to end the trials was not based on safety concerns, and was instead the result of an independent analysis showing trials would not likely “meet their primary endpoint.” Sales of aducanumab, assuming regulatory clearance, were estimated to have reached $12 billion, Goldman Sachs wrote in 2017.
Levi Strauss (LEVI) returned to the public markets after an absence of more than three decades. Shares of Levi Strauss begin trading Thursday morning on the New York Stock Exchange under the ticker LEVI at $22.22, or about 31% higher than the company’s IPO priced at $17 per share.
The San Francisco, California-based company offered about 36.7 million shares, bringing the total amount raised to $623.3 million. That values Levi around $6.6 billion, including shares outstanding after the IPO.
ECONOMY
New jobless claims fell more-than-expected for the week ending March 16, according to the Department of Labor’s weekly release, suggesting the labor market remains resilient despite slowdown fears.
Initial unemployment claims for the week decreased to 221,000, down 9,000 from the upwardly revised reading for the week prior and 4,000 below consensus economist expectations. With the upward revision to the earlier week’s claims, the new four-week moving average rose 1,000 to 225,000.
Continuing jobless claims also came in lower-than-expected. For the week ending March 9, continuing claims totaled 1.75 million, below the 1.77 million expected and the upwardly revised 1.777 million from the week before.
The Philadelphia Fed’s monthly index for manufacturing business conditions sharply improved in March, with the gauge registering at 13.7 versus 4.8 expected. February’s reading was negative 4.1.
The rebound came as both new orders and shipments indices rebounded from negative readings last month. Almost three-quarters of firms included in the regional Fed’s survey indicated labor shortages, and more than half reported they had positions that had been vacant for more than 90 days.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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