The laggards: Domino’s Pizza -7%, Webjet -6.1%, Pro Medicus -4.9%

Stocks on Wall Street closed higher on Thursday, building on their winning week, as investors sifted through a deluge of news about the economy, interest rates and corporate profits.

The S&P 500 rose 1 per cent after shaking off an early stumble, returning to its highest level in six weeks. The Dow Jones Industrial Average also recovered from a midafternoon slide to end 0.5 per cent higher, while the Nasdaq composite rose 1.4 per cent as Tesla and technology stocks led the market.

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Much of Wall Street’s focus was on Europe, where a years-long experiment with negative interest rates came to a close. In the United States, reports suggested the economy is slowing more than expected, while a better-than-expected profit report from Tesla headlined a mixed set from the nation’s biggest companies. Stocks briefly lost ground after President Joe Biden tested positive for COVID, but only by a bit.

At the centre of this year’s sell-off for financial markets has been the world’s punishingly high inflation, and the moves made by central banks to squash it. On Thursday, the European Central Bank surprised markets when it raised interest rates by more than expected, its first increase in 11 years.

“I was trading right when the ECB (news) came out and it actually caused long-term bonds to rally,” said Jay Hatfield, CEO of Infrastructure Capital Advisors.

As with the US Federal Reserve, which is set to raise rates next week for a fourth time this year, the hope is that higher rates will slow the economy enough to beat back high inflation. The risk is that higher rates push down on investment prices, and too-aggressive hikes could cause a recession.

In the US, some areas of the economy have already begun to soften.

The highest number of workers filed for unemployment benefits last week in eight months, though it remains low compared with history. A separate report released Thursday morning showed manufacturing in the mid-Atlantic region weakened by significantly more than economists expected.

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The discouraging data helped pull Treasury yields lower and could steer the Federal Reserve toward less aggressive hikes on interest rates. That in turn could help support stocks.

with AP

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