After a tumultuous trading session, U.S. stocks rebounded on Thursday, propelled by a surge in investor optimism centered around high-profile earnings and the anticipation of Friday’s employment report. The rally across all three major U.S. stock indexes was most pronounced in the tech-heavy Nasdaq.
“There’s further digestion of the Fed,” remarked Thomas Martin, Senior Portfolio Manager at GLOBALT in Atlanta. “It’s still a growth market, and yesterday’s sell-off was an overreaction. So today, we’re getting a rally.” The sentiment echoes the aftermath of the Federal Reserve’s announcement a day earlier, dashing hopes of imminent interest rate cuts.
In extended trading, Meta Platforms shares rose after reporting better-than-expected revenue and announcing its inaugural dividend. Amazon.com also experienced gains post-market following its earnings release.
However, Apple Inc. faced a dip in extended trading as its profit and revenue surpassed analyst estimates, but sales in China fell short of targets.
On Wednesday, the Federal Open Markets Committee (FOMC) left its policy rate unchanged, as anticipated. During the subsequent press conference, Fed Chair Jerome Powell dismissed the likelihood of a March rate cut, resetting market expectations and triggering a substantial sell-off.
The KBW Regional Banking index witnessed a 2.3% decline, primarily influenced by an 11.1% drop in New York Community Bancorp’s shares. The bank reported challenges in its commercial real estate portfolio, reigniting concerns about the well-being of U.S. regional lenders. The broader S&P Banking index had a more moderate decline, finishing the day down 1.4%.
The ongoing fourth-quarter reporting season remains robust, with 208 S&P 500 companies having reported thus far. Of these, 80% have surpassed consensus earnings estimates, according to LSEG. Analysts now anticipate a 6.4% year-on-year growth in aggregate S&P 500 earnings for the October-December period, an improvement over the 4.7% growth projected on January 1.
Economic data unveiled rising productivity, which helped mitigate labor costs. Simultaneously, an uptick in announced layoffs and weekly jobless claims provided further indications of a softening labor market—a crucial factor for the Fed in steering inflation on a sustainable downward path.
“We see these data, on the eve of the labor report tomorrow, as consistent with a healthy but moderating labor market,” remarked Bill Northey, Senior Investment Director at U.S. Bank Wealth Management in Billings, Montana. “(These reports) are consistent with our view of the economic path for 2024; that it will continue to grow, but at a slower pace.”
The S&P 500 surged 1.25% to close at 4,906.19 points. The Nasdaq saw a gain of 1.30%, reaching 15,361.64 points, while the Dow Jones Industrial Average rose by 0.97% to 38,519.84 points.
Among the 11 S&P 500 sector indexes, 10 experienced gains, with consumer discretionary leading the way, up 1.98%, followed by a 1.97% gain in consumer staples.
Merck witnessed a notable 4.6% advance after the drugmaker reported upbeat fourth-quarter results. Conversely, Qualcomm faced a 5.0% decline due to concerns over Android sales in China. Honeywell experienced a 2.4% dip after the industrial conglomerate provided a disappointing first-quarter guidance.
In terms of market breadth, advancing stocks outpaced falling ones by a ratio of 3.0-to-one. The volume on U.S. exchanges was relatively heavy, with 12.0 billion shares traded, surpassing the 20-session average of 11.6 billion shares.