After a significant sell-off in the previous session, stocks witnessed a robust rebound during Thursday's trading. Both the Dow and the Nasdaq saw steady increments, ending near their day's best levels at 38,519.84 and 15,361.64 respectively. The S&P 500 also jumped to conclude at 4,906.19.
This rebound was fuelled by a trader sentiment that Wednesday's sell-off presented a favorable buying opportunity, coupled with hope that the markets would regain their upward momentum - a trend observed throughout a large part of January. Although the Federal Reserve intimated an interest rate cut unlikely for March - contributing to Wednesday's downturn - economists strongly believe an eventual rate cut by the central bank is a question of "when" rather than "if".
According to CME Group's FedWatch Tool, a March rate cut has a modest probability of 37.5 percent, while a significant near 100 percent certainty is projected by early May. Furthermore, the consistent dip in treasury yields, which saw the benchmark ten-year note yield falling to its most minimal in over a month, may have also sparked buying interest.
Moreover, despite the Labor Department reporting an unexpected slight rise in first-time unemployment benefits claims for the week ending January 27th, the overall economic outlook remains generally optimistic. The upcoming monthly jobs report and Friday's employment report are keenly anticipated.
Manufacturing activity in the U.S. for January showed a surprising increase as per the Institute for Supply Management. A rise in the manufacturing PMI to 49.1 from December's revised 47.1 was observed, marking the highest reading since October 2022, though a reading below 50 still signals contraction.
Other noteworthy developments included a significant rise in gold stocks, driven by a moderate increase in the precious metal's price. Computer hardware stocks also demonstrated noteworthy strength. However, banking stocks experienced notable weakness.
In the global arena, the Asia-Pacific region had mixed outcomes with Japan's Nikkei 225 Index receding by 0.8 percent and Hong Kong's Hang Seng Index edging upwards by 0.5 percent. Major European markets reported an overall decline.
In the bond market, treasuries witnessed a significant upturn, with the yield on the benchmark ten-year note, which operates inversely to its price, tumbling to a one-month closing low.
Looking ahead, the monthly jobs report is expected to garner maximum attention; trading could also potentially be affected by the forthcoming quarterly results announcement from tech giants Amazon, Apple, and Meta Platforms.
