The major domestic equity indexes added to gains in the last hour of trading after having slightly pared gains upon the release of minutes from the Federal Open Market Committee’s June meeting.
The minutes reflected confidence among the Federal Reserve’s policymakers in the strength of the U.S. economy and its plans for future interest-rate hikes. In the June meeting, the Fed increased rates for the second time this year, and it has signaled that additional increases are likely.
Earlier, share prices were higher on the precept that the United States could and likely would walk back threatened tariffs on European cars if the European Union scrapped duties on U.S. cars in return.
Technology stocks led gains on the S&P 500, with shares of several chipmakers rising. The Philadelphia semiconductor index rose 2.7 percent.
Nonetheless, the tariffs on $34 billion worth of Chinese imports are due to go into effect on Friday. Beijing said it would respond immediately and in equal measure on U.S. goods ranging from cars to soybeans.
There was no evidence of any last-minute negotiations between U.S. and Chinese officials, business sources in Washington and Beijing said. However, it is likely that Friday’s impending tariffs have already been priced into stocks.
German Chancellor Angela Merkel said she would back lowering EU tariffs on U.S. car imports. Trump could abandon threatened tariffs on imported European cars if in return the European Union scrapped duties on U.S. cars.
Shares of chipmaker Qorvo Inc rose 5.6 percent after KeyBanc, citing strong demand for smartphones in China and stabilizing iPhone sales, upgraded the company’s stock to “overweight.”
Micron Technology Inc’s shares rose 2.2 percent after the company forecast only a small hit from a temporary ban on some sales in China.
Earlier on Thursday, the ADP National Employment Report showed private employers added 177,000 jobs in June, below Reuters’ consensus of an increase of 190,000. That comes ahead of the more comprehensive non-farm payroll report on Friday.
Approximately 5.76 billion shares changed hands on the major domestic equity exchanges, as compared to the 7.07 billion share average over the past 20 trading days.
Fed Minutes Say No Recession
The minutes of the Fed’s June 12-13 meeting discussed whether recession lurked around the corner and expressed concerns global trade tensions could hit an economy that by most measures looked strong.
The minutes, which described a meeting in with the Fed raised interest rates for the second time this year, also suggested policymakers might soon signal that the Fed’s rate hiking cycle was advanced enough that policy was no longer boosting nor constraining the economy.
The minutes overall gave the impression that the Fed was impressed by the economy’s strength and confident with its plans to continue raising rates, but also fixated on what might push the economy off its upward course.
Fed policymakers had a wide-ranging discussion on whether the recently slim spread between short- and long-term interest rates might be a sign of an impending recession.
“A number of participants thought it would be important to continue to monitor the slope of the yield curve,” according to the minutes.
Policymakers also took in a special presentation by Fed staff on another potential indicator of recession: the spread between the Fed’s current policy rate and the expected rate several quarters ahead derived from futures markets.
That indicator might have more reliable information than the yield curve, which might be distorted by temporary factors, the staff said, according to the minutes.
The document released on Thursday did not indicate whether policymakers took either the yield curve or the information from the special staff presentation as pointing toward an impending recession.
Indeed, policymakers generally agreed recent economic data showed a strong economy that was evolving in line with their expectations.
However, they also discussed several global factors potentially weighing on the economy or its outlook, including “political and economic developments in Europe and various emerging markets.”
Many of the Fed’s contacts across the country said they were worried that a recent increase in tariffs levied by the United States and its trading partners was weighing on investment, according to the minutes’ summary of policymaker discussions.
According to the minutes, most members noted that uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects.
Day’s Economic News
According to the ADP National Employment Report on private payrolls, the number of new jobs rose less than expected in June while the number of Americans filing for unemployment benefits also saw an unexpected increase last week, but that did little to change perceptions that labor market conditions continued to tighten.
The labor market is viewed as being near or at full employment, with the jobless rate at an 18-year low of 3.8 percent. The unemployment rate is down three-tenths of a percentage point this year and is near the Fed’s forecast of 3.6 percent by the end of this year.
Thursday’s ADP report indicated that private employers hired 177,000 workers in June, less than market expectations for a 190,000 gain. Private payrolls increased by 189,000 jobs in May. The slowdown in hiring likely reflects difficulties finding qualified workers. There are a record 6.7 million unfilled jobs.
The government’s comprehensive employment report scheduled for release on Friday is likely to show that employers added 195,000 jobs to their payrolls in June, on top of the 223,000 positions created in May, according to a Reuters survey of economists.
In a separate report on Thursday, the Labor Department reported that initial claims for state unemployment benefits increased by 3,000 claims to a seasonally adjusted 231,000 claims for the week ended June 30. Claims data for the prior week was revised to show 1,000 more applications received than previously reported. The Labor Department said only claims for Maine were estimated last week.
Claims could become volatile in the coming weeks as automobile manufacturers close assembly lines for annual retooling. More auto workers are likely to be affected by the temporary plant closures than in the past, which could throw off the model that the government uses to smooth the data for seasonal fluctuations. For example, General Motors has announced it will close its Flint assembly plant for the whole of July.
The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose by 2,250 claims to a total of 224,500 claims last week.
The claims report also showed the number of people receiving benefits after an initial week of aid increased by 32,000 to 1.74 million people in the week ended June 23. The four-week moving average of the so-called continuing claims fell by 1,750 claims to 1.72 million claims, the lowest level since December 1973.