Nasdaq Extends Yesterday’s Pullback, Dow Closes Higher For Fifth Straight Session

The major U.S. stocks indexes spent much of Wednesday’s session on opposite sides of the unchanged line and turned in another mixed performance during trading on Thursday.

While the Dow closed higher for the fifth straight session, reaching its best closing level in well over a month, the Nasdaq extended the sharp pullback seen in the previous session.

The Dow climbed 194.17 points or 0.6 percent to 32,033.28, the Nasdaq tumbled 178.32 points or 1.6 percent to 10,792.67 and the S&P 500 fell 23.30 points or 0.6 percent to 3,807.30.

The continued upward move by the Dow partly reflected a surge by shares of Caterpillar (CAT), with the construction equipment maker spiking by 7.7 percent to a four-month closing high.

Caterpillar (CAT) rallied after reporting third quarter results that beat analyst estimates on both the top and bottom lines.

Dow components Honeywell (HON), McDonald’s (MCD) and Merck (MRK) also move notably higher after reporting better than expected third quarter earnings.

The blue chip index also benefited from a positive reaction to a report from the Commerce Department showing U.S. economic activity rebounded by slightly more than expected in the third quarter following two straight quarters of contraction.

The report said real gross domestic product shot up by 2.6 percent in the third quarter following a 0.6 percent drop in the second quarter and a 1.6 percent slump in the first quarter. Economists had expected GDP to jump by 2.4 percent.

The rebound in GDP largely reflected a 2.8 percent boost from trade, as exports soared by 14.4 percent and imports, which are a subtraction in the calculation of GDP, plunged by 6.9 percent.

The data offset recent concerns about an impending recession but did little to dent recent optimism about the Federal Reserve slowing the pace of interest rate hikes.

“Overall, while the 2.6% rebound in the third quarter more than reversed the decline in the first half of the year, we don’t expect this strength to be sustained,” said Paul Ashworth, Chief North America Economist at Capital Economics.

“Exports will soon fade and domestic demand is getting crushed under the weight of higher interest rates,” he added. “We expect the economy to enter a mild recession in the first half of next year.”

Meanwhile, a steep drop by Meta Platforms (META) weighed on the tech-heavy Nasdaq, with the Facebook parent plunging by 24.5 percent.

The sell-off by shares of Meta came after the company reported weaker than expected third quarter earnings and provided disappointing guidance.

Sector News

Biotechnology stocks showed a significant pullback on the day, with the NYSE Arca Biotechnology Index slumping by 1.9 percent after ending the previous session at its best closing level in well over a month.

Significant weakness also emerged among semiconductor stocks, as reflected by the 1.5 percent drop by the Philadelphia Semiconductor Index.

Gold stocks also showed a notable move to the downside amid a modest decrease by the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 1.5 percent.

On the other hand, airline stocks moved sharply higher on the day, with the NYSE Arca Airline Index soaring by 2.1 percent to a one-month closing high.

Brokerage stocks also turned in a strong performance on the day, resulting in a 1.5 percent jump by the NYSE Arca Broker/Dealer Index.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan’s Nikkei 225 Index dipped by 0.3 percent, while Hong Kong’s Hang Seng Index advanced by 0.7 percent.

The major European markets also finished the day mixed. While the French CAC 40 Index fell by 0.5 percent, the German DAX Index inched up by 0.1 percent and the U.K.’s FTSE 100 Index rose by 0.3 percent.

In the bond market, treasuries extended the recovery rally seen over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 7.8 basis points to 3.937 percent.

Looking Ahead

A report on personal income and spending is likely to attract attention on Friday, as it includes a reading on inflation said to be preferred by the Federal Reserve

Traders are also likely to keep an eye on reports on employment costs, consumer sentiment and pending home sales as well as the latest earnings news.

Amazon (AMZN), Apple (AAPL) and Intel (INTC) are among the companies releasing their quarterly results after the close of today’s trading.

Energy giants Exxon Mobil (XOM) and Chevron (CVX) are also among the companies due to report their results before the start of trading on Friday.

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