Nasdaq, S&P 500, Dow Jones jump despite Microsoft warning

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Optimism returned to Wall Street on Thursday as investors shrugged off mounting economic concerns and Microsoft’s warning to send stocks higher. The advance rekindled sentiment that prompted a substantial rebound last week, paring losses after the sale that has marked most of 2022 so far.

Wall Street saw bullish sentiment during most premarket trades, but suffered a setback after Microsoft issued a reduced forecast. However, the major averages recovered from this early fall, rallying for much of the rest of the day, with Friday’s employment data now in focus.

The Dow Jones (DJI) completed +1.3%S&P 500 (SP500) ended +1.8% and the Nasdaq (COMP.IND) firm +2.7%.

The Nasdaq gained 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 trading at 4,176.82, climbing 75.59 points on the session.

Ten of the 11 S&P 500 sectors posted gains, led by a 2.9% rise in consumer discretionary. Communication services, information technology and materials also rose by at least 2.4%. Energy was the only hurdle and even this segment showed only a slight decline.

Microsoft cut its fourth-quarter revenue and profit forecast due to forex 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 business cycle risk, the data has consistently refuted the short-term recession narrative,” wrote MKM’s Michael Darda.

“Once again, we need to free ourselves from the Pavlovian reaction function of the last cycle in which the rates of change of macroeconomic momentum indicators were closely associated with risk-on/risk-off events with any sustained tightening of conditions. badly received by the central bank (so-called Fed Put),” Darda said. “It’s the playbook when there’s no (or little) growth, no (or little) inflation and a Fed that fails lower (not higher) on its inflation target. We have repeatedly argued for more than a year: market commentators analyzing the current environment through the prism of the 2009-2019 cycle are, in a word, “hurting”.

Jobs figures topped economic indicators this morning a day ahead of May’s payrolls report.

ADP May jobs data showed a gain of 128K from the consensus of 240K and the previous figure of 202K which was revised to 247K. In addition, initial jobless claims fell by 11,000 to 200,000, from the expected 210,000 that had been anticipated.

“The U.S. labor market is still going strong,” said Gregory Daco, chief economist at EY Parthenon. “Initial #unemployment claims fell to 200,000 at the end of May, layoffs remain at record highs according to the #JOLTS report, and payroll gains are expected to be weaker but still robust in tomorrow’s #jobsreport .”

Among active stocks, Hewlett Packard Enterprise was among the S&P’s biggest decliners after weak earnings and guidance.

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