Stock Market Today: Stocks Rise Ahead of Next Inflation Update

Stocks started the day in positive territory Thursday as banking industry concerns eased and expectations grew that the Fed could pause rate hikes at its May meeting. And while optimism waned throughout the day, the three major benchmarks still closed higher for a second straight day. 

The absence of jarring financial sector headlines created a sense of calm in equity markets today. Still, many regional bank stocks, including First Republic (FRC, -4.0%) and PacWest (PACW, -4.4%) traded lower after President Joe Biden asked regulators to increase oversight of medium-sized banks. Biden's proposals include requiring more banks to undergo annual stress tests and increasing supervision on financial firms with assets ranging from $100 billion to $200 billion.

On the economic front, the final reading on fourth-quarter gross domestic product (GDP) was revised down to 2.6% from 2.7%. Meanwhile, weekly jobless claims rose by a higher-than-expected 7,000 last week to 198,000. 

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"A tick up in jobless claims within the context of a downward-revised GDP could suggest Fed action is taking its toll, but it's important to keep in mind that those claims are still relatively low, and GDP still shows growth," says Mike Loewengart, head of model portfolio construction at Morgan Stanley. 

As it stands, interest rate traders assign a roughly 50-50 probability for either a pause or 0.25% rate hike at the next Fed meeting, according to CME Group.

Economic data will remain in focus tomorrow, with the personal consumption expenditures (PCE) index – the Fed's preferred measure of inflation – set to be released ahead of the open.

In single-stock news, Bed Bath & Beyond (BBBY) spiraled 26.2% after the embattled home goods retailer said it expects fiscal fourth-quarter revenue and same-store sales to both be down 50% year-over-year. Additionally, the company began a large stock offering, which hints at deeper financial troubles.

As for the major indexes, the Nasdaq Composite rose 0.7% to 12,013, the S&P 500 added 0.6% to 4,050, and the Dow Jones Industrial Average gained 0.4% to 32,859.

Best AI stocks, cybersecurity stocks for growth investors

There's just one more day left in Q1, and needless to say, it's been a wild three months. "Hard to believe we're already at the end of the first quarter, but perhaps less hard to believe that there have been some surprises since Jan 1st … isn't that always the case?," writes Liz Young, head of investment strategy at SoFi, in a note to clients. "It's also what makes markets so fun, they're never too predictable."

One of the biggest surprises, Young says, is the outperformance in growth and tech stocks. "Given that the narrative entering 2023 was much about value and cyclicals rather than growth and tech, this bounceback from the rout of 2022 is a real head turner," she says. 

While this red-hot run could stall out later this year – particularly if a recession hits – there's plenty of long-term opportunities for growth investors, especially among the best AI stocks and the top cybersecurity stocks, both of which are markets expected to see increased spending over the next several years.