S&P 500 surges to end at over five-month high, Nasdaq closes up 3.3% as Meta leads rally in tech sector stocks
By Isabel Wang and Joseph Adinolfi
U.S. stocks ended mostly higher on Thursday after the Nasdaq Composite and the S&P 500 index surged to their highest levels in about five months, buoyed by upbeat earnings from Facebook parent
Stocks finished higher on Wednesday, with the Nasdaq Composite jumping more than 2% to finish the session at its highest level since September.
What drove markets?
Stocks advanced for a third day on Thursday, adding to the gains that followed Wednesday's Fed interest-rate hike decision and Chair Jerome Powell's press conference.
The social-media giant's advance helped lift shares of other mega-cap technology giants, driving the Nasdaq's outperformance. Shares of Google- parent
"As market conditions shifted in 2022, investors dumped growth stocks, like tech, in favour of value stocks which were deemed more suitable to the challenging environment," Nigel Green, CEO of the de Vere Group, said Thursday.
"But what is happening now, we believe, is the beginning of a rebound," he said. "First, valuations of tech and other growth stocks are currently low, having been hit by the previous rotation into value stocks. And second, inflation has seemingly peaked and interest rates are set to stabilize, which takes away a major obstacle for tech stocks."
Investors also found succor in Powell's commentary, with the Fed chair coming off as more dovish than many had expected.
Robert Conzo, CEO and managing director of The Wealth Alliance thinks that the markets have no problem fighting the Fed right now. He said the markets believe there's a tailwind... making it feel like it's time to recover, but Powell is not budging.
"The Fed needs to see economic data come down for at least another six to nine months before we can expect a pivot. In the meantime, investors will continue to see huge market swings if the markets stay at odds with the Fed," said Conzo.
As a result, the market's gains on Thursday were concentrated in some of the most interest-rate sensitive sectors of the S&P 500, including consumer-discretionary, information technology and communication services, the sector to which Meta belongs.
See: Did Powell just give stocks permission to keep on climbing? Here's what latest Fed decision means for markets
During the Wednesday press briefing Powell repeatedly highlighted disinflation seen outside core services, while refusing to push back on the torrid rally in stocks and bonds that began in October.
His comments followed the Fed's decision to hike rates by 25 basis points on Wednesday, which marked the latest step-down in the pace of rate hikes following a 50 basis point hike in December.
"You didn't get what the market expected, which was a strong pushback against the loosening of financial conditions in the past couple of months," said Jake Jolly, senior investment strategist at BNY Mellon Investment Management. "Because you didn't get that, the market is sensing that the end of this cycle is approaching. And that's a good thing for equities."
Meanwhile, the Dow was the only one of the major U.S. equity indexes to end mired in the red on Thursday, a notable divergence for the blue-chip gauge.
See:What the Fed's interest rate hike means for the housing market: 'That is good news for mortgage rates'
Investors also digested more interest-rate hikes from the European Central Bankand Bank of England, which both boosted borrowing costs by 50 basis points. However, while the ECB signaled more hikes would likely follow, the BoE suggested that it might soon pause.
U.S. economic data released Thursday showed the number of Americans applying for unemployment benefits fell to a nine-month low of 183,000 at the end of January. The weekly jobless claims data suggest the labor market remains robust ahead of a monthly reading from the Labor Department due out Friday.
Investors are now looking ahead to Friday's monthly report on the labor market from the Department of Labor. Economists polled by the Wall Street Journal expect the pace of job creation to have slowed to 187,000 in January, down from 223,000 during the prior month.
See: U.S. likely added 187,000 jobs in January, but watch out for this wild card
Companies in focus
-- Steve Goldstein contributed to this report.
(END) Dow Jones Newswires
February 02, 2023 16:30 ET (21:30 GMT)
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