US stocks gain ground as bond market signals caution

NEW YORK – Stocks rose broadly in early trading on Thursday, putting major indexes on track for weekly gains.

The S&P 500 was up 0.9% at 10:19 a.m. EST. The Dow Jones Industrial Average rose 156 points, or 0.5%, to 31,189 and the Nasdaq rose 1.5%.

Shares of small companies outperformed the broader market, signaling that some investors remain confident in economic growth. The Russell 2000 rose 1.9%.

Companies that benefit the most from a healthy economy led the gains, with tech stocks doing much of the heavy lifting. Apple rose 1.9%.

The energy sector also rose as U.S. crude oil prices jumped 4.9% in a reversal from Tuesday’s tumble. Exxon Mobil is up 3.2%.

The major indices are on track for weekly gains in what has been turbulent over the past few months.

The bond market, however, continues to signal concern over a potential recession with new data showing that the number of Americans filing for unemployment benefits surpassed the 230,000 mark for the fifth consecutive week. While claims remain low, the past week was the highest level of claims in nearly six months.

The 10-year Treasury yield rose to 2.96% from 2.91% on Wednesday night. The two-year Treasury yield is higher than the 10-year yield, a relatively rare thing seen by some investors as a bad omen.

On Wednesday, the US government announced that employers advertised fewer jobs in May amid signs of a weakening economy and there are already signs that retailers have hindered in hiring.

A weakening in the broader labor market, which has remained strong throughout the pandemic recovery, could signal that inflation is slowing. Investors will get a clearer picture on Friday when the more detailed June jobs report comes out.

Investors try to determine if a recession is on the horizon as the Federal Reserve aggressively raises interest rates temper generalized inflation. Businesses are squeezed by higher costs due to supply chain issues and have hiked prices for everything from food to clothing.

Consumers have cut back on spending as inflation squeezes budgets. Russia’s invasion of Ukraine in February has pushed up energy prices in 2022, leading to record gasoline prices in the United States.

The main concern is that the Fed’s interest rate hikes could go too far in slowing economic growth and triggering a recession. After last month’s meeting, the Fed raised its rate by three-quarters of a point to a range of 1.5% to 1.75% – the biggest increase in nearly three decades – and signaled that further significant hikes would probably be needed.

European markets rose on a day when British Prime Minister Boris Johnson announced that he was resigning in the middle a flood of resignations from members of his conservative party.