Dow gains nearly 350 points as jobless claims data eases rate worries

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Wall Street’s main indexes ended higher on Thursday, led by growth stocks in light trading, as unemployment data signaled the Federal Reserve’s interest rate hikes might be starting to dent labor market strength in its bid to fight inflation.

The Dow Jones Industrial Average soared 345.09 points, or 1.1%, to 33,220.80, the S&P 500 was up 1.8% and the Nasdaq shot up 2.6%.

“It’s just relief,” said Keith Buchanan, portfolio manager at GLOBALT Investments in Atlanta. “Selling pressure has been overwhelming the market recently and we could be having a break. That allowed room for stocks to move, and with lower volume (that) can materialize into a pretty good day.”

Shares of Apple, Alphabet, Microsoft and Amazon all rose nearly 3% following declines in the past few sessions.

The Labor Department’s report showed initial claims for unemployment benefits rose 9,000 to a seasonally adjusted 225,000 for the week ended Dec. 24. Economists polled by Reuters had forecast 225,000 claims for the latest week.

The report hinted at some softening in an otherwise tight labor market, bolstering hopes that the US central bank would dial down its aggressive monetary policy stance.

“Signs of the job market beginning to weaken is certainly apparent,” said Peter Cardillo, chief market economist, Spartan Capital Securities LLC.

“We’re at the end of the year and of course, the market has not performed well. We’re seeing some bargain hunting coming in today.”

Traders held on to bets of a 25 basis point rate hike from the Federal Reserve in February and see rates peaking at 4.92% in June 2023. 

The Cboe Volatility Index, known as Wall Street’s “fear gauge,” slipped, signaling an easing in investor anxiety.

A strong labor market and resilient American economy have fueled worries that interest rates could stay higher for longer even though easing inflationary pressures keep alive hopes of smaller increases.

The Fed’s aggressive rate hikes have hammered equities this year, with the benchmark S&P 500 shedding 19.6% and tech-heavy Nasdaq losing nearly 33% in value.

Wall Street’s main indexes dropped over 1% on Wednesday, with the Nasdaq hitting a 2022 closing low as rising COVID cases in China and geopolitical tensions added to fears of a likely recession in 2023.

However, investor preference for high-dividend yielding stocks with steady earnings have staved off a steeper decline in the industrials-heavy Dow Jones, which is down just 8.8% on the year.

Tesla shares rose 8.1% to 121.82 after Chief Executive Elon Musk told staff they should not be “bothered by stock market craziness.” The stock is still down 69% for the year.