Relief rally for stocks as markets digest jobless claims data

investmentnews.com:

Stocks staged a relief rally and bonds fell after the latest US labor-market reading helped ease fears about a more pronounced slowdown in the world’s largest economy.

All major groups in the S&P 500 advanced, with the gauge up about 1.5% as data showed US initial jobless claims tumbled the most in nearly a year. As economic angst subsided, Treasuries dropped across the curve and traders further trimmed bets on aggressive Federal Reserve easing in 2024.

Markets have been on a tailspin since last week’s economic data spurred concerns the Fed is waiting too long to cut rates from a two-decade high, jeopardizing prospects for a soft landing. Those jitters combined with stretched positioning, underwhelming tech earnings and poor seasonal trends were among the factors spurring massive volatility around the globe.

To Ian Lyngen at BMO Capital Markets, the jobless claims data is being interpreted as evidence the labor market remains solid.

“Some good news with jobless claims coming in less than expected,” said Chris Zaccarelli at Independent Advisor Alliance. “It’s hard to believe a recession has already begun. We are exercising caution, but think that the panic that started earlier in the month was overblown.”

The S&P 500 rose to around 5,280. The tech-heavy Nasdaq 100 climbed 2%. The Russell 2000 of smaller firms added 1.5%. Nvidia Corp. led gains in tech megacaps. Eli Lilly & Co. soared 13% on a bullish outlook. 

Treasury 10-year yields advanced five basis points to 4%. The dollar was little changed.

Any data which suggests that the Fed isn’t behind the curve in regards to its likely rate-cut in September is welcome news for investors.

The main focus for the labor market will be on the next monthly jobs report in early