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Optimism returned to Wall Street on Thursday as investors dismissed growing economic concerns and Microsoft’s warning to raise stocks. The breakthrough revived the sentiment that caused a substantial rebound last week, reducing losses after the sale that has marked most of 2022 so far.
Wall Street experienced optimism during most of the pre-market trading, but suffered a setback after Microsoft released a narrow guide. However, the main averages recovered from that early setback, and recovered for much of the rest of the day, with Friday’s job data now focused.
The Dow Jones (DJI) closed + 1.3%, the S&P 500 (SP500) closed + 1.8% and the Nasdaq (COMP.IND) closed + 2.7%.
The Nasdaq rose 322.44 points to close at 12,316.90. The Dow Jones advanced 435.05 points to finish at 33,248.28. The S&P 500 closed at 4,176.82, up 75.59 points in the session.
Ten of the 11 S&P 500 sectors posted gains, led by a 2.9% increase in discretionary consumption. Communication services, information technology and materials also rose by at least 2.4%. Energy was the only resilient and even this segment recorded only a partial decline.
Microsoft lowered fourth-quarter earnings and earnings expectations due to headwinds. Meanwhile, investors continued to debate the likelihood of a recession and how best to play the Federal Reserve’s rate hike campaign.
“Although many macro commentators confuse stock market volatility with economic cycle risk, the data has consistently refuted the narrative of the short-term recession,” wrote Michael Darda of MKM.
“Once again, we need to detach ourselves from the Pavlovian reaction function of the last cycle in which the exchange rates of macro momentum indicators were closely associated with on / risk-off risk events with any sustained hardening of the Unwanted financial condition by the central bank (the so-called Fed Put), “Darda said. “This is the game book when there is no growth (or low), no inflation (or low) and a Fed that is failing downwards (not upwards) in its inflation target. We have discussed repeatedly for over a year: Market commentators who analyze the current context through the prism of the 2009-2019 cycle, in one sentence, “do it wrong.”
Employment figures dominated economic indicators this morning a day ahead of the May payroll report.
May’s ADP employment data showed a gain of 128,000 compared to the consensus of 240,000 and the previous figure of 202,000 which was revised to 247,000. In addition, initial unemployment claims fell from 11,000 to 200,000, compared to projected figures of 210,000.
“The U.S. labor market is still strong,” said Gregory Daco, chief economist at EY Parthenon. “Initial claims for unemployment benefits fell to 200,000 by the end of May, layoffs remain at record lows, according to the #JOLTS report, and payroll earnings are likely to be colder, but still robust in tomorrow’s #jobsreport “.
Among the active stocks, Hewlett Packard Enterprise was among the biggest S&P falls after weak results and guidance.