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Stocks Climb as Jobless Claims Spark Rate Cut Hopes; Mixed Earnings Reports Temper Gains

Stocks surged on Thursday, with the Dow Jones Industrial Average marking a seventh consecutive day of gains, buoyed by fresh jobless claims data that fueled optimism for potential Federal Reserve rate cuts this year.


The Dow advanced 331.37 points or 0.85%, closing at 39,387.76, its longest rally since December's nine-day stretch. The S&P 500 rose by 0.51% to end at 5,214.08, while the Nasdaq Composite increased by 0.27% to finish at 16,346.26.


Leading the gains in the Dow were Home Depot and Caterpillar, both climbing over 2%.

The latest weekly jobless claims, which were the highest since August, have heightened expectations that the Fed might reduce interest rates later in the year.


Moreover, a bond auction that saw high demand contributed to lowering yields. The 10-year Treasury yield dropped more than 2 basis points to 4.461%, and the 2-year yield fell 3 basis points to 4.813%.


Phillip Colmar, a global strategist at MRB Partners, commented on the market's reaction, noting, "A bit of softness in the data provides the Fed an opportunity to act on its dovish inclinations. As long as bond yields remain non-threatening, the market has a go-ahead to continue embracing risk."


However, the enthusiasm was briefly tempered by a new round of quarterly earnings that fell short of expectations. Warner Bros Discovery saw its stock increase by 3% despite missing earnings projections, while Arm's shares dropped over 2% due to uninspiring revenue forecasts. Airbnb's shares declined more than 6% after its promising first-quarter results were overshadowed by weak future guidance.


In related news, UBS predicted a downturn in U.S. inflation, projecting that the upcoming Consumer Price Index (CPI) for April would show a resumption of the slowing inflation trend disrupted earlier in the year. UBS also noted potential moderation in housing costs and consumer spending.


Meanwhile, Barclays highlighted a continued slump in the U.S. electric vehicle (EV) market, dubbing it an "EV winter." The firm adjusted its volume estimates for General Motors downward, despite the auto manufacturer's strong stock performance this year, suggesting possible future reductions in production forecasts.


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