The Nasdaq and S&P 500 jumped and touched roughly five-month highs on Thursday as a more dovish-than-expected message from Federal Reserve Chair Jerome Powell boosted equities and Meta Platforms shares soared on rigorous cost controls.
The Dow slipped, weighed down by declines in some big healthcare stocks.
Investors were still digesting the Fed’s policy decision on Wednesday and comments from Powell, who acknowledged progress in the fight against inflation and appeared reluctant to push back against the rally in stocks and bonds.
“Markets are just reacting to I think a more dovish press conference from Powell yesterday,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial. “I think the market got out of that Fed meeting still hoping that conditions can be easier at the end of the year.”
The Dow Jones Industrial Average (.DJI) fell 88.57 points, or 0.26%, to 34,004.39, the S&P 500 (.SPX) gained 60.52 points, or 1.47%, to 4,179.73 and the Nasdaq Composite (.IXIC) added 399.57 points, or 3.38%, to 12,215.89.
After a bruising 2022, U.S. stock markets have made a strong start to the year, with tech and other stocks that lagged last year leading the rebound amid hopes that the Fed will temper its aggressive rate hikes, which in turn could alleviate some pressure on equity valuations.
Those trends continued on Thursday. The communications services sector jumped over 6%, led by a 26% gain for Facebook parent Meta. The company revealed stricter cost controls this year and a $40 billion share buyback, as CEO Mark Zuckerberg called 2023 the “year of efficiency.”
“I think that encapsulates what investors want to hear from tech companies this year,” Saglimbene said. “They want to hear that it is a year of efficiency, they are getting out ahead of a slowdown in the economy.”
UnitedHealth Group (UNH.N) shares fell 5.6% after the U.S. government proposed Medicare Advantage reimbursement rates below analyst estimates, and the stock weighed down the Dow. A 3.9% decline in Merck (MRK.N) shares, after the drugmaker forecast 2023 earnings below Wall Street estimates, also dragged on the blue chip index.
Data showed jobless claims fell last week to a nine-month low, highlighting the labor market’s resilience, ahead of monthly U.S. employment numbers on Friday.
Advancing issues outnumbered declining ones on the NYSE by a 2.70-to-1 ratio; on Nasdaq, a 3.12-to-1 ratio favored advancers.
The S&P 500 posted 35 new 52-week highs and one new low; the Nasdaq Composite recorded 140 new highs and 11 new lows.