Wall Street ticks higher as investors digest US GDP data

US stocks rose on Thursday, looking to recover some losses after the Fed’s higher for longer stance on interest rates drove markets lower over the past week. The S&P 500 rose about 0.6%, while the Dow Jones popped about 0.5%. The tech-heavy Nasdaq Composite led gains, adding 0.8%.

A fresh estimate for second-quarter GDP came in unchanged at 2.1%. Official figures showed jobless claims last week rose slightly from the week prior to 204,000, compared with 215,000 expected. Data from the National Association of Realtors showed pending home sales for August plunged 7.1% down from the 0.9% monthly increase recorded in July.

The Fed’s message that rates will remain higher for longer has rattled markets, but stocks are showing some resilience after several days of steep losses. In bonds, the rapid rise in the 10-year Treasury yield continued as it topped 4.6%, trading at levels not seen in over 15 years.

Both markets are under pressure from the surge in the price of oil, which hit fresh 2023 highs on Wednesday and is up over 35% since the end of June. That is seen as likely to drive up fuel prices, posing a challenge to the Fed’s efforts to cool inflation and in turn to the chances of a rate cut. Friday brings the week’s data highlight, the reading on PCE inflation, the Fed’s preferred gauge.

However, some believe it won’t be persistent price increases that prompt central bankers to act, but insatiable American shoppers and an economy that stays too hot. In individual stocks, shares of Micron (MU) fell in premarket trading after the chipmaker said its first-quarter loss would be wider than previously forecast.

The drop in pending home sales is due to a combination of higher mortgage rates and seasonal factors, with sales typically falling this time of year and the recent increases in rates have lowered mortgage demand and housing supply.

Thursday’s economic data revisions mean little for the Fed, as a slew of data from the Bureau of Economic Analysis out Thursday revealed a slightly cooler US economy during the second quarter than initial data showed. The third reading of second quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 2.1% during the period, unchanged from the second reading but down from the initial reading of 2.4%.

In contrast to Fed officials, a sharp slowdown into the current year’s end is seen and accordingly this will keep policymakers on the sidelines, rather than following through with an additional rate hike as planned.