Stocks wavered Thursday as market participants digested the Federal Reserve’s more hawkish outlook on interest rates and some mixed economic news.
Starting with the econ data. Inflation was center stage for a second straight session, as the Producer Price Index (PPI) showed that prices charged by suppliers declined in May on a monthly basis. The data follow yesterday’s encouraging reading on consumer price inflation in the May CPI report.
“Today’s PPI report showed that at least for one key measure, prices are going down,” writes José Torres, senior economist at Interactive Brokers. “Headline PPI fell by -0.2% on a monthly basis, well below the +0.1% consensus, while the core was flat, also well below its +0.3% consensus rise.”
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Although the PPI should be “market friendly,” the economist reminds clients that while low inflation is good, deflation isn’t. “Today’s numbers may indicate a more rapidly deteriorating economy than the FOMC is willing to recognize in the short term,” Torres notes.
On Wednesday, the Federal Reserve’s Federal Open Market Committee (FOMC) projected just one quarter-point rate cut in 2024, down from the three it signaled in March.
In other econ news, layoffs reached a 10-month high, as initial claims for unemployment benefits rose to 242,000 for the week ended June 8. That exceeded economists’ estimates for 225,000 new claims.
“While these developments are unfavorable for individuals who no longer must punch a time clock, they point to easing conditions for employers and the potential for subdued price pressures,” adds Torres.
Stocks on the move
Dave & Buster’s Entertainment (PLAY) stock plunged 10.9% after the restaurant and gaming company came up short of expectations on all major financial metrics for its first quarter.
Even though PLAY is down nearly 17% for the year to date, analysts remain bullish. According to S&P Global Market Intelligence, the average analyst target price for the consumer staples stock is $65.71, representing implied upside of more than 48% to current levels. Additionally, the consensus recommendation is Buy.
Dell Technologies (DELL) rose 2.4% after financial services firm BofA Securities reiterated its Buy rating and $180 price target on the stock. BofA cited strong momentum into 2025 on improving demand for the company’s artificial intelligence (AI) servers and high-end storage, as well as a recovery in personal computers (PCs).
Broadcom (AVGO) was one of the S&P 500’s biggest movers Thursday after the chipmaker beat top- and bottom-line expectations for its fiscal second quarter and raised its full-year outlook.
The company also said its board approved a 10-for-1 stock split in order to “make ownership of Broadcom stock more accessible to investors and employees.” Based on AVGO’s current price of roughly $1,700, shares will be closer to around $170 once they start trading on a split-adjusted basis at the July 15 open.
AVGO rallied 12.3% to close at a record $1,678.99 a share.
As for the major indexes, the blue-chip Dow Jones Industrial Average logged a third down day, slipping 0.2% to finish at 38,647. The broader S&P 500 (+0.2% at 5,433) and tech-heavy Nasdaq Composite (+0.3% at 17,667) both closed at record levels.
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