Dec 29 (Reuters) – Wall Street’s main indexes rose on Thursday, led by growth stocks in light trading, as US unemployment data signaled the Federal Reserve’s interest-rate hikes might be starting to dent labor market strength in its bid to fight inflation.
All 11 S&P 500 sector indexes rose, with communication service (.SPLRCL) and technology (.SPLRCT) as the biggest winners with gains of nearly 3%.
“We’re in the middle of a bit of a regime shift whereby 2022 was all about the Fed and financial conditions,” said Huw Roberts, head of analytics at Quant Insight in London.
“In the last couple of weeks … US equities have become more sensitive to economic growth. The call in 2023 is going to be … between a hard and soft landing.”
Apple Inc (AAPL.O), Alphabet Inc (GOOGL.O), Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O), whose shares have been battered in the past few sessions, each gained more than 2.5 %.
“At the moment, the tech trade is running about 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 Labor Department reported an increase in the number of Americans filing new claims for unemployment benefits last week. But the data indicates a tight US job market even as the Federal Reserve works to cool demand for labor in its bid to lower inflation. read more
The yield on 10-year Treasury notes fell 2.2 basis points to 3.864% on the news.
The Fed’s aggressive interest rate hikes have hammered equities this year, with the benchmark S&P 500 (.SPX) shedding 19.3% and the tech-heavy Nasdaq tumbling nearly 33%.
The technology, consumer discretionary and communication services sectors (.SPLRCL) – which house several rate-sensitive high growth shares – are down 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 stellar annual gains of 57%.
Traders held on to bets of a 25 basis-point rate hike from the Fed in February and see rates peaking at 4.94% in June 2023. .
The CBOE Volatility index (.VIX), known as Wall Street’s “fear gauge,” slipped to 21.5, signaling reduced investor anxiety.
Wall Street’s main indexes dropped more than 1% on Wednesday, with the Nasdaq (.IXIC) 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 has limited losses in the Dow Jones Industrial Average (.DJI), which is down just 8.5% for the year.
At 3:11 pm ET, the Dow rose 340.88 points, or 1.04%, to 33,216.59, the S&P 500 (.SPX) gained 66.35 points, or 1.75%, at 3,849.57 and the Nasdaq Composite (.IXIC) added 261.18 points, or 2.56%, at 10,474.46.
Tesla Inc (TSLA.O) shares added 6.4% after Chief Executive Elon Musk told employees they should not be “bothered by stock market craziness.” The stock is still down 66% for the year.
Advancing issues outnumbered decliners on the NYSE by a 5.00-to-1 ratio; on Nasdaq, a 4.15-to-1 ratio favored advancers.
The S&P 500 posted one 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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