U.S. Stocks Show Substantial Rebound After Another Early Sell-Off

Following another sell-off early in the session, stocks showed a substantial turnaround over the course of the trading day on Thursday. The major averages bounced well off their lows of the session, with the Dow and the S&P 500 reaching positive territory.

The Dow climbed 145.99 points or 0.5 percent to 31,656.42 after falling by nearly 300 points, while the S&P 500 rose 11.85 points or 0.3 percent to 3,966.85. The tech-heavy Nasdaq also rebounded well off its worst level of the day but still closed down 31.08 points or 0.3 percent to 11,785.13.

Bargain hunting contributed to the rebound on Wall Street, with traders picking up stocks at reduced levels after the major averages once again fell to their lowest levels in over a month.

The early weakness on Wall Street reflected lingering concerns about higher interest rates and the impact on the global economy, which have weighed on the markets for the past several sessions.

A steep drop by shares of Nvidia (NVDA) also contributed to the early sell-off, with the graphics chipmaker plunging by 7.8 percent on the day.

The decline by Nvidia came after the company warned approximately $400 million in potential sales to China could be impacted by new U.S. licensing requirements on shipments of some of its most advanced chips.

Fellow chipmaker Advanced Micro Devices (AMD) also moved notably lower after saying some of its chips would also be impacted by the new requirements.

The extended sell-off on Wall Street also came as the latest labor and manufacturing data was seen as confirming the Federal Reserve’s stance that it can remain aggressive with the tightening of policy.

With the more closely watched monthly jobs report looming, the Labor Department released a report this morning unexpectedly showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended August 27th.

The report showed initial jobless claims edged down to 232,000, a decrease of 5,000 from the previous week’s revised level of 237,000.

The dip came as a surprise to economists, who had expected jobless claims to inch up to 248,000 from the 243,000 originally reported for the previous week.

A separate report released by the Institute for Supply Management showed its reading on U.S. manufacturing activity remained at a two-year low in August.

The ISM said its manufacturing PMI came in at 52.8 in August, unchanged from July. Economists had expected the index to edge down to 52.0.

While the index remained at its lowest level since hitting 52.4 in June 2020, a reading above 50 still indicates growth in the manufacturing sector.

Sector News

Biotechnology stocks showed a substantial move to the upside over the course of the session, driving the NYSE Arca Biotechnology Index up by 2.3 percent. The index rebounded after hitting a two-month intraday low in early trading.

Considerable strength also emerged among healthcare and pharmaceutical stocks, with the Dow Jones U.S. Health Care Index and the NYSE Arca Pharmaceutical Index both climbing by 1.5 percent.

Utilities and retail stocks also moved notably higher as the day progressed, contributing to the recovery by the broader markets.

On the other hand, significant weakness remained visible among energy stocks, which saw further downside along with the price of crude oil. Crude for October delivery plunged $2.94 to $86.61 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plummeted by 3.6 percent and the NYSE Arca Oil Index tumbled by 2.6 percent.

Gold stocks also remained sharply lower amid a continued decrease by the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 3.3 percent to its lowest closing level in well over two years.

Steel, semiconductor and computer hardware stocks also ended the day notably lower, although well off their worst levels of the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index tumbled by 1.5 percent, while China’s Shanghai Composite Index fell by 0.5 percent.

The major European markets also showed significant moves to the downside on the day. While the U.K.’s FTSE 100 Index plunged by 1.9 percent, the German DAX Index and French CAC 40 Index slumped by 1.6 percent and 1.5 percent, respectively.

In the bond market, treasuries moved sharply lower over the course of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, surged 13.2 basis points to a two-month closing high of 3.265 percent.

Looking Ahead

The Labor Department’s closely watched monthly jobs report is likely to be in the spotlight on Friday, overshadowing a separate report on factory orders.

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