Wall Street Rebounds, Recouping Losses from Earlier in the Week
After experiencing back-to-back drops earlier in the week, Wall Street made a strong recovery on Thursday. The S&P 500 rose by 0.9 percent, gaining 41.73 points to reach 4,780.94. The Dow Jones Industrial Average also saw an increase of 0.5 percent, adding 201.94 points to reach 37,468.61. The Nasdaq composite had the largest jump, rising by 1.3 percent or 200.03 points to reach 15,055.65.
The rally was led by Big Tech stocks, with Apple experiencing a 3.3 percent increase that turned its weekly loss into a gain. Chip companies also performed well after Taiwan Semiconductor Manufacturing Co. provided a revenue forecast for 2024 that exceeded analysts’ expectations. Broadcom saw a gain of 3.6 percent, while TSMC’s stock in the United States jumped by 9.8 percent.
Despite a warning from Humana about higher medical costs impacting its profit, the market remained steady. Treasury yields in the bond market slowed their ascent from earlier in the week, which had been fueled by traders pushing back their predictions for when the Federal Reserve would begin cutting interest rates. Higher yields can negatively impact stock prices and put pressure on the economy.
Impact of Fed Expectations
The Federal Reserve has indicated that it may cut rates multiple times in 2024 due to cooling inflation since its peak two summers ago. However, critics argue that Wall Street’s expectations for rate cuts this year were excessive, leading to inflated stock prices and lower Treasury yields.
On Thursday, the yield on the 10-year Treasury rose slightly to 4.13 percent from 4.11 percent the previous day. This increase was more moderate compared to earlier in the week when it jumped from 3.95 percent. The yield on the two-year Treasury, which is influenced by expectations for Fed action, remained at 4.36 percent.
A report on Thursday morning showed a decrease in the number of U.S. workers applying for unemployment benefits, reaching its lowest level since two Septembers ago. While this is positive news for the economy, a stronger job market could also contribute to inflationary pressures. As a result, the chances of the Federal Reserve cutting rates at its March meeting have decreased to approximately 57 percent, down from over 70 percent a week ago.
Chris Larkin, Managing Director of Trading and Investing at E-Trade from Morgan Stanley, commented on the robust economic data and its impact on rate cuts: “The story this week continues to be robust economic data, and how it may keep rate cuts on ice for a while.”
Mixed Economic Reports
Additional reports on the economy were mixed. One report indicated that manufacturing in the mid-Atlantic region was contracting more than expected, while another showed that homebuilders started more projects last month than economists had anticipated, although it was weaker than November’s level.
Financial Companies and Fastenal
Several financial companies reported weaker results for the end of 2023 compared to analysts’ expectations. Discover Financial Services saw a decline of 10.8 percent, while KeyCorp lost 4.6 percent after both reported profits that fell short of forecasts, despite exceeding revenue expectations.
On the other hand, Fastenal experienced a significant gain of 7.2 percent, making it the top performer in the S&P 500. The company, which distributes safety supplies and fasteners, reported a higher quarterly profit than analysts had predicted.
Global Markets
Internationally, stock indexes in Europe and Asia saw gains, reducing their losses for the week.
By Stan Choe
