US stocks advanced while Treasury yields dropped after the government reported May inflation above market estimates, signaling investor optimism price pressures will abate as the Federal Reserve expects.
The S&P 500 set an intraday record high before pulling back slightly to a gain of 0.5% at 4,239.18. The Dow Jones Industrial Average was fractionally higher at 34,466.24 while the Nasdaq Composite was up 0.8% to 14,020.33. Healthcare and real estate stocks led the way while banks lagged, with the Financial Select Sector SPDR Fund (XLF) down 1.2%.
The 10-year Treasury yield fell to a three-month low of 1.46% despite a 0.6% rise in the Consumer Price Index in May, ahead of expectations for a 0.5% increase after the 0.8% gain in April. Core CPI excluding food and energy rose 0.7%, topping the consensus estimate for a 0.5% increase.
"According to the Fed, while startling on a nominal level, the recent bout of inflation will prove transitory, reflecting a reversal of lower levels from last year, and a recalibration of supply and demand in this new post-pandemic environment," said Stifel Chief Economist Lindsey Piegza in a note Thursday. "Heading to the end of 2021 and into 2022, policymakers expect inflation to subside back down nearer their 2% objective."
US initial jobless claims fell to 376,000 in the week ended June 5 from an unrevised 385,000 level in the previous week, compared with expectations for a larger decrease to 370,000 in a survey of analysts compiled by Bloomberg. The four-week moving average fell to 402,500 from 428,000 the prior week.
RH (RH) shares rallied nearly 16% after the home furnishings retailer reported improved Q1 results, with adjusted earnings climbing to $4.89 per share from $1.27 per share and net sales growing 78% year-over-year to $860.8 million, well above average analyst estimates for an adjusted profit of $4.12 per share on $757.7 million in sales in a Capital IQ survey. RH also raised its sales growth forecast for FY22.
Signet Jewelers (SIG) climbed 14% after the company increasing its FY22 outlook following better-than-expected Q1 results. It earned $2.23 per share excluding one-time items on $1.69 billion in sales. The Street was at $1.27 per share and $1.62 billion, respectively.
Nielsen (NLSN) shares dropped 4.7%, the worst in the S&P 500, after Morgan Stanley downgraded the television ratings compiler to equal-weight from overweight. The second-highest gainer on the index was ServiceNow (NOW), with shares trading up 5.3% after Goldman Sachs added the buy-rated stock to its conviction list with a price target of $695.
SVB Leerink raised Biogen's (BIIB) price target to $475 from $380 and kept its outperform rating as the company prepares to roll out its recently approved treatment for Alzheimer's disease. Shares traded 1.9% higher.
West Texas Intermediate crude oil futures slipped 0.3% to $70.16 per barrel, giving up earlier gains.
In the precious metals markets, gold was up 0.3% at $1,901.20 an ounce and silver up 0.5% to $28.15 an ounce. Copper fell 0.9% to $4.49 per pound.