U.S. Stocks Finish Volatile Session Firmly Positive

Stocks saw significant volatility during trading on Thursday, with the major averages showing wild swings before eventually the day firmly positive. With the upward move on the day, the major averages extended the recovery rally seen in the previous session.

The major averages continued to recover after ending Tuesday’s trading at their lowest closing levels in over a month. The Dow climbed 193.24 points or 0.6 percent to 31,774.52, the Nasdaq rose 70.23 points or 0.6 percent to 11,862.13 and the S&P 500 advanced 26.31 points or 0.7 percent to 4,006.18.

The volatility on Wall Street came as traders digested comments from Federal Reserve Chair Jerome Powell, who reiterated the central bank’s commitment to aggressively fighting inflation.

“We need to act now, forthrightly, strongly as we have been doing,” Powell said during a Q&A session at the Cato Institute’s 40th Annual Monetary Conference. “And we have to keep at it until the job is done.”

Powell also once again warned about the dangers of allowing elevated prices to become entrenched, noting the Fed has a “responsibility” to bring inflation back down to 2 percent.

“The longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm, and that has the capacity to raise the costs of getting inflation down,” he said.

The Fed chief’s tone was similar to the speech he delivered at last month’s Jackson Hole economic symposium, which helped trigger the recent sell-off on Wall Street.

Powell’s comments are seen as reinforcing expectations that the Fed will raise interest rates by another 75 basis points at its next meeting later this month.

CME Group’s FedWatch Tool currently indicates an 86.0 percent chance of a 75 basis point rate hike at the September 20-21 meeting and just a 14.0 percent chance of a 50 basis point rate hike.

Some traders applauded the consistency of Powell’s message, while concerns about higher interest rates and the impact on the economy continued to hang over on the markets.

In U.S. economic news, the Labor Department released a report unexpectedly showing a modest decrease in initial jobless claims in the week ended September 3rd.

The report showed initial jobless claims edged down to 222,000, a decrease of 6,000 from the previous week’s revised level of 228,000.

Economists had expected jobless claims to inch up to 240,000 from the 232,000 originally reported for the previous week.

With the unexpected dip, jobless claims fell to their lowest level since hitting 202,000 in the week ended May 28th.

Sector News

Biotechnology stocks turned in some of the market’s best performances on the day, driving the NYSE Arca Biotechnology Index up by 3.4 percent.

Vaccine maker Moderna (MRNA) posted a strong gain after Deutsche Bank upgraded its rating on the company’s stock to Buy from Hold.

Substantial strength was also visible among banking stocks, as reflected by the 2.8 percent surge by the KBW Bank Index. The index continued to rebound after ending Tuesday’s trading at its lowest closing level in well over a month.

Healthcare, semiconductor and brokerage stocks also saw notable strength on the day, while telecom and airline stocks moved to the downside.

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 spiked by 2.3 percent, while China’s Shanghai Composite Index dipped by 0.3 percent.

The major European markets also finished the day mixed. While the German DAX Index edged down by 0.1 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index both climbed by 0.3 percent.

In the bond market, treasuries moved modestly lower over the course of the session after seeing early volatility. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.7 basis points to 3.292.

Looking Ahead

A lack of major U.S. economic data may lead to light trading on Friday, although traders are still likely to keep an eye on comments from several Fed officials.

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