U.S. Stocks Pull Back Off Best Levels But Hold On To Strong Gains

Following the sell-off seen in the previous session, stocks showed a strong move back to the upside in morning trading on Thursday. The major averages gave back ground in the afternoon but managed to remain firmly positive.

While selling pressure picked up going into the close, the major averages held on to notable gains. The Dow surged up 300.19 points or 1 percent to 30,603.36, the Nasdaq climbed 66.56 points or 0.5 percent to 13,337.16 and the S&P 500 jumped 36.61 points or 1 percent to 3,787.38.

The early rally on Wall Street comes as traders looked to pick up stocks at somewhat reduced levels following the steep drop seen on Wednesday.

The Dow and the S&P 500 saw their biggest one-day declines since October in the previous session, reflecting concerns about new coronavirus strains, uncertainty about a new stimulus bill and worries about highly speculative trading.

While all those issues remain, traders seemed unfazed by analyst warnings that the markets could be headed for a sharp pullback.

Buying interest may also have been generated by a report from the Labor Department showing a bigger than expected decline in first-time claims for U.S. unemployment benefits in the week ended January 23rd.

The Labor Department said initial jobless claims fell to 847,000, a decrease of 67,000 from the previous week’s revised level of 914,000.

Economists had expected jobless claims to drop to 875,000 from the 900,000 originally reported for the previous week.

Jobless claims declined for the second consecutive week after reaching a more than four-month high of 927,000 in the week ended January 9th.

The Commerce Department also released a report showing economic growth matched economist estimates in the fourth quarter of 2020.

The report said real gross domestic product jumped by 4.0 percent in the fourth quarter after skyrocketing by 33.4 percent in the third quarter.

Despite the rebound in the second half of the year, GDP for 2020 contracted by 3.5 percent following the 2.2 percent growth seen in 2019.

A separate report from the Commerce Department showed new home sales in the U.S. rebounded in the month of December after falling for four consecutive months.

Despite the advance by the broader markets, shares of Apple (AAPL) and Tesla (TSLA) showed notable moves to the downside on the day.

Apple slumped by 3.5 percent after the tech giant reported better than expected fiscal first quarter results but provided cautious guidance.

Electric car maker Tesla tumbled by 3.3 percent after reporting fourth quarter earnings that missed analyst estimates.

Meanwhile, heavily shorted stocks like GameStop (GME), AMC Entertainment (AMC) and Bed Bath & Beyond (BBBY) gave back ground after skyrocketing in the previous session.

Sector News

Airline stocks soared early in the session and managed to hold on to strong gains throughout the day, driving the NYSE Arca Airline Index up by 4.4 percent.

American Airlines (AAL) helped lead the sector higher, jumping by 9.3 percent after reporting a narrower than expected fourth quarter loss on revenues that exceeded expectations.

Substantial strength was also visible among gold stocks, as reflected by the 3.8 percent spike by the NYSE Arca Gold Bugs Index. The index bounced off its lowest closing level in seven months.

The rebound by gold stocks came even though the price of the precious metal closed lower for the sixth straight session, with gold for February delivery sliding $7 to $1,837.90 an ounce.

Banking, software and semiconductor stocks also showed strong moves back to the upside, moving higher along with most of the other major sectors.

Meanwhile, telecom stocks moved sharply lower over the course of the session, dragging the North American Telecom Index down by 3.1 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Thursday. Japan’s Nikkei 225 Index tumbled by 1.5 percent, while Hong Kong’s Hang Seng Index plummeted by 2.6 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index slid by 0.6 percent, the German DAX Index rose by 0.3 percent and the French CAC 40 Index advanced by 0.9 percent.

In the bond market, treasuries gave back ground after trending higher over the past few sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.1 basis points at 1.055 percent.

Looking Ahead

Trading on Friday may be impacted by reaction to another batch of U.S. economic data, including reports on personal income and spending, consumer sentiment and pending home sales.

On the earnings front, Juniper Networks (JNPR), U.S. Steel (X), Visa (V) and Western Digital (WDC) are among the companies releasing their quarterly results after the close of today’s trading.

Caterpillar (CAT), Chevron (CVX), Colgate-Palmolive (CL), Eli Lilly (LLY) and Honeywell (HON) are also among the companies due to report their results before the start of trading on Friday.

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