Tech stocks lead Wall Street rally day after losses
NEW YORK — Wall Street burst out of its hangover Thursday, and U.S. stocks bounced back in a widespread rally after their worst day since September.
The S&P 500 gained 1.2% to recover three quarters of its sharp loss from the day before. The Dow Jones Industrial Average rose 369 points, or 1%, while the Nasdaq composite leaped 1.3%.
Big Tech stocks led the way in a mirror reversal of the day before, when Alphabet and Microsoft sank despite reporting stronger profits than analysts expected. Microsoft climbed 1.6% a day after falling 2.7%. Google’s parent company, Alphabet, added 0.8% after tumbling 7.5%
Big Tech stocks are Wall Street’s most influential because they’re the biggest, and they’re facing high expectations after soaring much more than the rest of the market last year. Amazon, Apple and Meta Platforms reported their latest results after trading ended Thursday and faced similar pressure to deliver big numbers to justify their higher runs.
Meta Platforms, the owner of Facebook and Instagram, was a star in afterhours trading. It surged after topping analysts’ expectations for profit and revenue and saying it would start paying its shareholders a dividend.
Stocks rose broadly after a suite of reports suggesting the economy remains solid, while pressures on inflation may be easing. Such data could give the Federal Reserve more of the evidence it wants of a slowdown in inflation before it will deliver the cuts to interest rates that investors crave. A day earlier, stocks fell sharply after the Fed’s chair, Jerome Powell, warned it didn’t have enough of such evidence.
Merck climbed 4.6% after the pharmaceutical giant delivered stronger profit and revenue for the latest quarter than analysts expected. Etsy jumped 9.1% after it added a partner from Elliott Investment Management to its board, who said he sees opportunity to significantly increase the company’s value.
On the losing end of Wall Street, shares of New York Community Bancorp fell another 11.1% after plunging 37.7% a day before, when it reported a loss for its latest quarter and cut its dividend to build its financial strength. The surprising report caused stocks of other regional banks to tumble, reviving uncomfortable memories of the banking crisis last year that led to the collapses of Silicon Valley Bank, Signature Bank and others.
New York Community Bancorp had acquired much of Signature, and analysts say much of its struggles are related to that. But its losses tied to commercial real estate are a reminder of challenges that the entire industry faces. The KBW Nasdaq Regional Bank index fell 2.3%, following Wednesday’s tumble of 6%.
Shares of Peloton Interactive dropped 24.3% after it gave a forecast for upcoming revenue that fell short of analysts’ expectations. That was despite its roughly matching forecasts for the latest quarter.
All told, the S&P 500 rose 60.54 points to 4,906.19. The Dow added 369.54 to 38,519.84, and the Nasdaq rallied 197.63 to 15,361.64.
In the bond market, the yield on the 10-year Treasury fell to 3.86% from 3.92% late Wednesday.
It sank after one report showed that slightly more workers applied for unemployment benefits last week than expected. The number is still low relative to history. And Wall Street wants to see a cooldown in the job market, which could keep a lid on inflationary pressures.
A separate report offered similar encouragement for traders. It said U.S. workers were much more productive in the last three months of 2023 than expected, producing more stuff per hour worked. Strong growth in productivity could allow workers to get bigger raises in pay without adding more pressure on inflation.
“If companies can generate strong productivity growth, they will be able to control costs and protect margins without sacrificing talent in an environment of still-elevated wages and fading pricing power,” said EY Chief Economist Gregory Daco.