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Stock rally accelerates with Dow rising 250 points, Nasdaq up 1%

Traders work on the floor of the New York Stock Exchange, (NYSE) in New York.
Brendan McDermid | Reuters

The Nasdaq Composite bounced on Thursday, a day after dipping into correction territory, as investors rotated back into technology names.

The Nasdaq, which is home to many of the market’s biggest tech names, ended Wednesday more than 10% below a record set in November, indicating a technical correction. The index was 1.2% higher on Thursday.

The Dow Jones Industrial Average gained 250 points, or 0.7%, on Thursday. The S&P 500 added 0.9%. The small-cap benchmark Russell 2000, which hit a 52-week low on Wednesday, rose 1.1% on Thursday.

Technology stocks led markets higher on Thursday. Zoom Video added nearly 4%, Microsoft rose 2.5%, Meta Platforms popped nearly 3%, and Tesla was up more than 4%. Streaming giant Netflix rose 1.7% ahead of its quarterly report after the bell on Thursday.

“After a rough start to 2022 and one of the worst starts ever for the Nasdaq and tech stocks, buyers are willing to step up and buy what could be some nice bargains,” said Ryan Detrick of LPL Financial.

Peloton, however, tanked 20% on new it is temporarily halting production of its connected fitness products as consumer demand wanes, according to internal documents obtained by CNBC.

Dow component Travelers posted beats on the top and bottom lines while American Airlines also beat estimates but lowered guidance. Travelers rose 5%.

United Airlines shares rose slightly after the company reported its quarterly results and warned that omicron has dented bookings and will delay its pandemic recovery.

“Earnings season is early, but overall we are looking at another solid quarter from corporate America. Yes, with rate hikes coming, we are dancing a delicate line and experiencing some normal market volatility, but the underpinnings of the economy remain quite solid,” added Detrick.

Stocks moved higher even as government bond yields remained elevated, part of a market repricing as the Federal Reserve gets set to tighten monetary policy.

The central bank meets next week, with markets indicating just a slight chance of action on interest rates. However, traders have fully priced in the first of what is expected to be four 0.25 percentage point hikes through 2022.

The two-year Treasury, which is most closely tied to Fed rate policy, most recently yielded about 1.04%, while the benchmark 10-year note was at 1.84%.

Unemployment data on Thursday signaled the surge in omicron could be hurting the recovery.

Jobless claims for the week ended Jan. 15 totaled 286,000 for the week, their highest level since October. The read was well above the Dow Jones estimate of 225,000 and a substantial gain from the previous week’s 231,000.

“The surge in jobless claims and drop in existing home sales has lead to some easing 10-year bond yields which could reflect some reduction in the degree the Fed could tighten – certainly dampens speculation of a 50 [basis point] rate hike in March,” said Kathy Bostjancic, chief U.S. economist at Oxford Economics. “Moreover we are in for more volatile markets due to the heightened degree of uncertainty surrounding the economic, inflation and interest rate outlook.”

On Wednesday, the Dow fell for a fourth straight day, dropping more than 300 points as Treasury yields built on their early 2022 gains. The S&P 500 also fell 0.9%. The Nasdaq Composite closed down by 1.15%.

Brad McMillan, chief investment officer at Commonwealth Financial Network, acknowledged that the turbulence could last for some time but said investors shouldn’t panic about interest rate increases and that they’re normal as the economy returns to normal.

“The economy and markets can and do adjust to changes in interest rates,” McMillan said. “This environment is a normal part of the cycle and one we see on a regular basis. The current trend is perhaps a bit faster than we’ve been seeing, but it is a response to real economic factors–and, therefore, normal in context.”

For the week, the Dow is down about 1.2%. The S&P 500 has lost 1.4% since Monday. The Nasdaq is the biggest loser, down 1.8% this week.

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