Dec 29 (Reuters) – Wall Street’s main index rose on Thursday, led by growth stocks in light trade, as U.S. jobless data signaled that the Federal Reserve’s rate hikes may have begun to weaken the strength of the labor market in its bid to fight inflation.
All 11 S&P 500 sector indexes rose with communications services (.SPLRCL)
and technology (.SPLRCT) as the biggest gainers with gains of almost 3%.
“We’re in the middle of a bit of a regime change where 2022 was about the Fed and financial conditions,” said Huw Roberts, head of analytics at Quant Insight in London.
“In the last few weeks … US stocks have become more sensitive to economic growth. The call in 2023 is going to be … between a hard and a soft landing.”
Apple Inc (AAPL.O)Alphabet Inc (GOOGL.O)Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O)whose shares have been hit in the past few sessions, each gained more than 2.5%.
“Right now, the technology trade is running on company fundamentals and idiosyncratic risks,” Roberts said, noting, for example, that rising COVID cases in China could affect Apple’s production in the country and its share price.
The US Department of Labor reported an increase in the number of Americans filing new claims for unemployment benefits last week. But the data indicate a tight US labor market, even as the Federal Reserve works to cool demand for labor in its bid to lower inflation. Read more
The 10-year Treasury yield fell 2.2 basis points to 3.864% on the news.
The Fed’s aggressive rate hikes have hammered stocks this year with the benchmark S&P 500 (.SPX) falls 19.3% and the technology-heavy Nasdaq falls almost 33%.
The technology, consumer discretionary and communications services sectors (.SPLRCL) — which houses several price-sensitive high-growth stocks — have fallen between 29% and 40% this year, making them the worst performers among S&P 500 sector indexes.
Energy (.SPNY) shares have bucked the trend with stunning annual gains of 57%.
Traders held on to bets on a 25 basis point Fed rate hike in February and see rates peaking at 4.94% in June 2023.
CBOE Volatility Index (.VIX)known as Wall Street’s “fear gauge,” fell to 21.5, signaling reduced investor anxiety.
Wall Street’s main indices fell more than 1% Wednesday with Nasdaq (.IXIC) hit a closing level in 2022 as rising COVID cases in China and geopolitical tensions added to fears of a likely recession in 2023.
However, investors’ preference for high-yielding stocks with stable earnings has limited losses in the Dow Jones Industrial Average (.DJI)which is a decrease of only 8.5% for the year.
At 3:11 p.m. ET, the Dow was up 340.88 points, or 1.04%, at 33,216.59, the S&P 500 (.SPX) rose 66.35 points, or 1.75%, to 3,849.57 and the Nasdaq Composite (.IXIC) added 261.18 points, or 2.56%, to 10,474.46.
Tesla Inc (TSLA.O) shares rose 6.4% after CEO Elon Musk told staff they must not be “bothered by stock market frenzy.” The stock is still down 66% for the year.
Advancing issues outnumbered decliners on the NYSE by a ratio of 5.00 to 1; on the Nasdaq, a ratio of 4.15 to 1 favored advances.
The S&P 500 posted a new 52-week high and no new lows; The Nasdaq Composite recorded 54 new highs and 151 new lows.
Reporting by Echo Wang in New York; Additional reporting by Ankika Biswas and Amruta Khandekar in Bengaluru; Editing by Arun Koyyur, Anil D’Silva and Richard Chang
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