Stocks opened higher Thursday as investors took in some early morning updates on inflation and consumer spending. The positive price action quickly faded, though, as a selloff in semiconductor stocks sent the main indexes into the red.
Thursday's busy economic calendar included the February Producer Price Index (PPI), which measures what businesses are paying suppliers for goods. Data from the Bureau of Labor Statistics showed the PPI rose 0.6% from January to February, and was up 1.6% on an annual basis. Both figures were higher than economists were expecting.
Core PPI, which excludes volatile food and energy costs, was also higher than anticipated, rising 0.4% month-to-month and 2.8% year-over-year.
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Retail sales were also released earlier. While January's data showed retail sales fell by a wider-than-expected margin, Thursday morning's report indicated a rebound in February. Specifically, the Census Bureau said retail sales rose 0.6% from January to February, though this was below economists' estimates for an 0.8% gain.
Meanwhile, a report from the Labor Department showed that initial jobless claims unexpectedly fell last week, declining by 1,000 to 209,000.
"Scorching wholesale inflation data amidst this morning's lower-than-expected unemployment claims are sending market players back to the drawing board as they reevaluate the path of potential Fed rate cuts," says José Torres, senior economist at Interactive Brokers.
Indeed, according to CME Group's FedWatch Tool, futures traders are now pricing in a 54% chance the first quarter-point rate cut will come in June, down slightly from yesterday's 58%. Odds it will come in July are currently at 48%, up from 46% one day ago.
Microsoft adds $77 billion in market value on AI news
In single-stock news, Microsoft (MSFT) jumped 2.4%, adding $77 billion in market value, after the software giant said it will launch Copilot for Security on April 1. The generative AI (artificial intelligence) tool can help businesses respond to cybersecurity attacks and will boost Microsoft's top line with its "pay-as-you-go" pricing model.
"We expect a warm reception from customers to MSFT's usage-based pricing, as it will provide businesses a low-cost opportunity (initially) to pursue interesting cybersecurity use cases," says Mizuho Securities analyst Gregg Moskowitz, who has a Buy rating on the Dow Jones stock. "We also expect to see good monetization as efficiency and accuracy benefits become more apparent to users."
Robinhood pops as trading volume spikes
Robinhood Markets (HOOD) was another notable gainer, adding 5.2%. Last night, the online trading platform released its operating data for February, which showed that trading volumes were much higher year-over-year for stocks (+41%), options (+33%) and crypto (86%).
Also lifting the stock was a bullish note from Bernstein analyst Gautam Chhugani, who initiated coverage on HOOD with an Outperform (Buy) rating and a $30 price target – representing implied upside of 66% to current levels.
"The buy-side and sell-side, alike, refuse to see what we see – a monster of a crypto cycle over 2024-25," Chhugani says. "We expect crypto market cap to reach $7.5 trillion vs $2.6 trillion today," which should lead to impressive growth in Robinhood's crypto revenue, the analyst adds.
Still, the main indexes closed in negative territory as several large- and mega-cap semiconductor stocks sold off. Nvidia (NVDA), for one, fell 3.2%, while Advanced Micro Devices (AMD, -4.0%) and Intel (INTC, -X%) also declined.
As for the main indexes, the Nasdaq Composite fell 0.3% to 16,128, the S&P 500 dropped 0.3% to 5,150, and the Dow Jones Industrial Average shed 0.4% to 38,905.
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