Technology and growth stocks lifted Wall Street’s main indexes higher on Thursday after data pointing to signs of a cooling U.S. labor market eased worries about future interest rate hikes by the Federal Reserve.
Apple Inc (AAPL.O), Alphabet Inc (GOOGL.O), Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O), whose shares have been battered in the past few sessions, gained more than 2% each, with traders attributing the rise to bargain hunting.
All the major S&P 500 sector indexes rose, with consumer discretionary (.SPLRCD) and technology (.SPLRCT) leading the pack with a near 3% rise.
The U.S. Labor Department’s report showed initial claims for unemployment benefits rose 9,000 to a seasonally adjusted 225,000 last week, hinting at some softening in an otherwise tight labor market.
“The numbers were higher than the previous week, which is good for the Fed because it’s moving in the direction that it wants,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield.
The Fed’s aggressive rate hikes have hammered equities this year, with the benchmark S&P 500 (.SPX) shedding 19.3% and the tech-heavy Nasdaq tumbling nearly 33%.
The technology, consumer discretionary and communication services sectors (.SPLRCL) – which house several rate-sensitive high growth shares – are down between 29% and 40% this year, making them the worst performers among major S&P 500 sectoral indexes.
“Markets have sold off a lot recently and we’re due for a slightly technically over-sold bounce,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
Energy (.SPNY) shares have bucked the trend with stellar annual gains of 57%.
Traders held on to bets of a 25 basis-point rate hike from the Federal Reserve in February and see rates peaking at 4.94% in June 2023. .
The CBOE Volatility index (.VIX), known as Wall Street’s “fear gauge”, slipped, signaling an easing in investor anxiety.
A strong labor market and the resilient American economy have fueled worries that interest rates could stay higher for longer even though easing inflationary pressures have kept the hopes of smaller increases alive.
Wall Street’s main indexes dropped more than 1% on Wednesday, with the Nasdaq (.IXIC) hitting a 2022 closing low as rising COVID cases in China and geopolitical tensions added to fears of a likely recession in 2023.
However, investor preference for high-dividend yielding stocks with steady earnings has limited losses in the industrials-heavy Dow Jones (.DJI), which is down just 8.5% for the year.
At 11:47 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 385.90 points, or 1.17%, at 33,261.61, the S&P 500 (.SPX) was up 69.39 points, or 1.83%, at 3,852.61, and the Nasdaq Composite (.IXIC) was up 271.22 points, or 2.66%, at 10,484.50.
Tesla shares (TSLA.O) rose 8.3% after Chief Executive Elon Musk told staff they should not be “bothered by stock market craziness”. The stock is still down 66% for the year.
Shares of U.S.-listed Chinese online education firms such as TAL Education Group (TAL.N) and Gaotu Techedu Inc (GOTU.N) fell between 2% and 9% after Bloomberg News reported that China’s ministry of education published a new set of restrictions.
Advancing issues outnumbered decliners by a 7.04-to-1 ratio on the NYSE and 4.53-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week highs and no new lows, while the Nasdaq recorded 40 new highs and 117 new lows.
