Stock Market Gains As Powell Continues Testimony; Health Care Stocks Outperform

The stock market gained Thursday morning as jobless claims eased, pointing to a tight job market in spite of recession fears. Fed Chairman Jerome Powell continued to address Congress in his second day of testimony. Health care stocks gained.

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The Nasdaq composite gained 1.1%, the S&P 500 rose 0.4% and the Dow Jones Industrial Average was flat. The small-cap Russell 2000 index gained 0.5%.

Volume fell on the NYSE and Nasdaq compared with the same time on Wednesday.

Amazon.com (AMZN), Apple (AAPL) and Microsoft (MSFT) all gained more than 1.5%.

Jobless claims eased to 229,000 from 231,000 the previous week, according to the Labor Department. The consensus Econoday forecast was 225,000. The latest numbers remain near record lows.

PMI Points To Continued Weakness

The S&P Global purchasing managers index for June showed a drop to 51.2 in June from 53.6 in May. It was the weakest increase in five months, while weaker demand led to the first contraction in new orders since July 2020. The flash PMI report also noted that while costs remain high, the rise in input prices was the slowest since April 2021.

Powell today is testifying before the House Financial Services Committee. On Wednesday, Powell told a Senate panel that the Fed wants to see concrete evidence that inflation is cooling. He also acknowledged that continued rate hikes could results in a recession, but said the U.S. economy “is strong” and can withstand additional rate hikes.

Meanwhile, the average rate on a 30-year fixed-rate mortgage rose to 5.81%, the highest level since November 2008, Freddie Mac said Thursday.

The yield on the 10-year Treasury fell 11 basis points to 3.04%. The price of U.S. crude oil was nearly flat, at $106.18 per barrel.

Health Care Stocks Lead Stock Market

Health care stocks were one of the leading S&P sectors, accompanied by other inflation-resistant sectors such as utilities and consumer staples stocks. The Health Care SPDR ETF (XLV) gained 1.6% Thursday.

Merck (MRK) jumped 1.4% back into its buy range of an 89.58 buy point of a cup-with-handle base. Merck reclaimed its 50-day line, which is a bullish sign, but the breakout at 89.58 had failed. UnitedHealth (UNH) gained nearly 2%, on pace for a three-day rally. Shares just reclaimed their 200-day line on Tuesday and retook their 50-day line Thursday.

Johnson & Johnson (JNJ) also jumped above its 50-day line, gaining 1.3%. J&J’s relative strength line notched a new high, which shows power in price performance at this time. Shares are still below a 186.79 buy point. HMO provider Humana (HUM) gained 0.8% and appears to be forming a flat base with a 469.44 buy point.

FedEx (FDX) shares were down Thursday as the company prepares to report late Thursday its fiscal fourth quarter, shortly after making shareholder-friendly moves and signaling a strategy shift. FedEx stock fell Wednesday, but surged more than 11% last week. It is retesting resistance the 200-day moving average.

IBD 50 Drops, Chinese EV Makers Shine

The Innovator IBD 50 ETF (FFTY) dropped 2%, erasing earlier gains.

Funko (FNKO) led with a 10% gap up to new highs. JPMorgan Chase upgraded the collectibles maker to overweight from neutral, and lifted the target price to 28 from 25.

A rally in Chinese electric vehicles continued. Xpeng (XPEV) jumped 5% and is on pace for its sixth weekly increase in the past seven weeks.

Li Auto (LI), which recently launched its L9 SUV model, climbed more than 7%, past its Dec. 1 high of 37.45.

Follow Michael Molinski on Twitter @IMmolinski

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