U.S. stocks closed higher on Thursday as Wall Street clawed back from a sharp sell-off last session that sent the S&P 500 to its biggest single-day decline since September, as investors awaited a new reading of the Fed’s preferred inflation measure due Friday morning . .
What happened
-
The Dow Jones Industrial Average DJIA rose 322.35 points, or 0.9%, to end at 37,404.35.
-
The S&P 500 SPX finished 48.40 points higher, or up 1%, at 4,746.75.
-
The Nasdaq Composite COMP rose 185.92 points, or 1.3%, to end at 14,963.87.
On Wednesday, the Dow Jones fell 476 points, or 1.3%, while the S&P 500 and Nasdaq each fell 1.5%. It was the biggest single-day decline in the S&P 500 since September 26, according to Dow Jones Market Data, while the Dow and Nasdaq posted nine days of gains.
To see: Was the stock market’s midweek dip a ‘one-day wonder’ or the start of a ‘significant pullback’?
What drove the markets
A round of economic data Thursday may have helped U.S. stocks find their bearings after the sharp pullback seen late last session.
The Department of Labor said claims for initial unemployment benefits rose by 2,000 to 205,000 in the week ending December 16. Economists had forecast a total of 215,000 in the week ending December 16.
U.S. gross domestic product eased to 4.9% annualized growth in the third quarter, down from an initial estimate of 5.2%, while the Philadelphia Fed’s activity index fell further into negative territory.
These economic numbers weren’t “earth-shattering numbers,” but they still proved that a cooling economy will keep the Fed on track to cut rates in the “not-too-distant future,” says Chris Larkin, general manager of trade and commercial matters. investing with Morgan Stanley’s E-Trade, in emailed comments on Thursday.
Read: Four out of five industrial sectors are overbought, Citi strategists say, as the Morgan Stanley index turns negative
Buoyed by expectations for Federal Reserve rate cuts in the first half of 2024, Wall Street sent stocks soaring hard and fast last week, with the S&P 500 remaining less than 1% below its record high nearly two years ago.
However, stocks retreated on Wednesday, sending the Dow and Nasdaq on a nine-day winning streak. While there was no clear fundamental trigger for the sell-off, trading in derivatives known as zero-day-to-expiry options (0DTE) may have played a role, according to several market watchers. Technical overbought conditions and low volume were also cited as likely factors.
Still, the sell-off implies the year-end rally is not on solid footing because fundamentals don’t justify the stock market’s current level, said Don Calcagni, chief investment officer at Mercer Advisors.
With the S&P 500’s price-to-earnings ratio at 19.3 on Thursday for the next 12 months, investors are “overly rosy” in their expectations for 2024, and may not be able to rationalize these levels if the Fed doesn’t raise rates lowers as many expect, Calcagni told MarketWatch on Thursday.
To see: Why stock market bulls are saying ’embrace weakness’ after biggest stumble in three months
Other economic data showed the leading economic index fell 0.5% in November for the 20th straight month, continuing to point to a coming recession.
Friday morning will see the release of the November personal consumption expenditure index, which includes the Fed’s favorite inflation gauge.
Companies in focus
-
Shares of Nio Inc.
NIO,
+4.67%
ended Thursday up 4.7% as investors appeared to ignore a report in The Wall Street Journal that the Biden administration is considering raising tariffs on electric vehicles made in China. -
Micron Technology Inc.
IN
+8.63%
Shares rose 8.6% after the chip manufacturer’s results were better than expected. US. chip stocks rose broadly, with Intel
INTC,
+2.88%
an increase of 2.9% and Nvidia
NVDA,
+1.83%
an increase of 1.8%. -
Shares of Carnival Corp.
CCL,
+6.20%
rose 6.2% after the cruise line reported fourth-quarter results that beat expectations and provided an optimistic full-year profitability outlook.
Steve Goldstein contributed
