Stocks rose sharply Thursday morning to reach record levels as traders eyed a much stronger than expected print on consumer spending and a sharp improvement in the number of new jobless claims.
The Dow gained more than 200 points, or about 0.7%, to reach a record intraday high. The S&P 500 and Nasdaq also rose to reverse declines from a day earlier, with tech stocks leading the Nasdaq higher by more than 1%. Shares of Coinbase (COIN), the largest cryptocurrency exchange in the U.S., jumped after closing below its opening trade price in a volatile first day on the public markets.
Traders digested a key print on the strength of the U.S. consumer on Thursday, with the Commerce Department’s March retail sales showing the best monthly rise in retail sales since May 2020. Retail sales surged by 9.8%, with stimulus checks and easing social distancing standards helping fuel the gain.
What caught our eye was the 13.4% surge in spending on food and drink services, while clothing store sales were up by 18.1%. Relative to pre-pandemic levels, food and drink services sales are down just 5.1%, while clothing store sales are now higher than they were in February 2020,” Michael Pearce, senior U.S. economist for Capital Economics, said in an email Thursday. “That suggests a combination of loosening restrictions and easing of virus fears linked to the vaccine rollout are driving a rapid return to normalcy.”
“Spending will almost certainly drop back in April as some of the stimulus boost wears off, but with the vaccination rollout proceeding at a rapid pace and households finances in strong shape, we expect overall consumption growth to continue rebounding rapidly in the second quarter too,” he added.
Meanwhile, a new print on weekly jobless claims showed a plunge in new claims to a fresh pandemic-era low.
Members of the Federal Reserve have also underscored the recent pick-up in economic activity. In the Fed’s Beige Book, or collection of anecdotes about economic conditions across the Fed districts, the central bank noted that “national activity accelerated to a moderate pace from late February to early April,” with the leisure and hospitality industry especially boosted by rising demand for travel.
Other economist agreed with this assessment.
“We expect a strong rebound in growth in the second half of the year driven by vaccines, by improving virus trends, and the opening of the service sector,” Wilmington Trust’s Rhea Thomas told Yahoo Finance. “All of those will come with a rebound in consumer demand that will push inflation higher as well as interest rates.”
But even given the recovery, central bank officials have stuck to their script that the economy still needs significant support as it emerges from the pandemic. Fed Chair Jerome Powell said during remarks at The Economic Club in Washington, D.C., on Wednesday that the Fed’s criteria for considering an interest rate hike would not likely be reached before 2022, and that the central bank was inclined to taper its aggressive asset purchase program “well before” moving on rates.
9:32 a.m. ET: Stocks open higher after strong economic data
Here’s where markets were trading after market open on Thursday:
S&P 500 (^GSPC): +30 points (+0.73%) to 4,154.66
Dow (^DJI): +229.60 points (+0.68%) to 33,960.49
Nasdaq (^IXIC): +143.43 points (+1.04%) to 14,001,30
Crude (CL=F): -$0.23 (-0.36%) to $62.92 a barrel
Gold (GC=F): +$14.50 (+0.84%) to $1,750.80 per ounce
10-year Treasury (^TNX): -4.6 bps to yield 1.59%
8:38 a.m. ET: Retail sales surge by the most since May 2020
Retail sales surged by the most since May 2020 in March, with stimulus checks and easing social distancing standards generating a sharp rise in consumer spending.
Retail sales jumped 9.8% month-over-month in March, the Commerce Department said Thursday. This was greater than the 5.8% rise expected, and sharply reversed the 2.7% decline in retail sales from February.
By category, sporting goods, hobby and book stores posted the biggest monthly increase at 23.5%, followed closely by clothing and clothing accessories stores at 18.3%. Clothing store sales more than doubled their level from a year ago, during the early point of the pandemic in the U.S.
Motor vehicle and parts dealers’ sales also surge by more than 15%, and food services and drinking place sales jumped 13.4% month-over-month.
8:30 a.m. ET: Jobless claims plunge to pandemic-era low
New weekly jobless claims improved far more than…