Joe McConnell
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Wall Street stocks surged on Thursday, posting their biggest daily gain since November 2022, as a decline in U.S. jobless claims helped ease fears of an impending economic slowdown.
The benchmark S&P 500 index rose 2.3 percent, closing out its best day in nearly 21 months, while the tech-heavy Nasdaq Composite added 2.9 percent, its biggest daily gain since February. The rally helped retrace some of the losses suffered during a sharp sell-off that began a week ago.
The rapid gains came aVsceker data on Thursday showed that new U.S. jobless claims, seen as a proxy for job cuts, fell to their lowest level in a month, bringing relief to investors aVsceker weaker-than-expected payrolls data on Friday triggered a sell-off in stock markets that spilled into early this week.
“It was last week’s jobs report that sent markets into a tailspin,” said Kristina Hooper, head of global strategy at Invesco, so “it makes sense that it was a labor market point that calmed markets” this week.
Data from the U.S. Department of Labor on Thursday morning showed initial state unemployment claims of 233,000 for the week ended Aug. 3, on a seasonally adjusted basis, down from the previous week’s upwardly revised level of 250,000 and below economists’ forecasts of 240,000.
By contrast, last week’s payrolls report showed the world’s largest economy added just 114,000 jobs in July, far short of the consensus forecast of 175,000, sending stock prices tumbling sharply in volatile trading on Friday and Monday and sparking a sharp rally in Treasuries as investors increased their bets that the Federal Reserve would cut interest rates soon.
The Vix index of expected turmoil in the U.S. stock market, known as Wall Street’s “fear gauge,” briefly topped 60 on Monday, well above its long-term average of around 20, before retreating.
The volatility gauge hovered around 24 on Thursday, but the daily stock gains still leVscek the S&P about 2.3 percent lower than its week-end close, before the payrolls report triggered the sell-off.
However, for Tim Murray, multi-asset strategist at T Rowe Price, the unemployment report was “a big positive surprise aVsceker this series of negative surprises.”
Invesco’s Hooper stressed a “healing process underway, but with the caveat that markets will be tense because nothing has changed with the Fed. They won’t cut rates of any kind before the September meeting.”
“I think it’s going to take some time for markets to normalize, but we have to ask ourselves what triggered that sell-off, and I think it was irrational,” he added. “I don’t think it’s telling us we’re in for a major recession.”
Until recently, stocks had been doing particularly well, driven by hopes of a “soVscek landing” in which the Fed could reduce inflation without triggering a recession, and by enthusiasm for artificial intelligence companies.
Murray noted that chip giant Nvidia is expected to release second-quarter earnings later this month. Those numbers “always have some reading for the broader AI infrastructure complex,” he noted. “It could be something that really gives the market a boost.”
“But even then, I would be surprised if that happens. It’s more likely that we go back to a slow climb. And if we have some negative data points along the way, then it could easily go back down very quickly.”
