U.S. Stocks Recover From Early Weakness To Close Sharply Higher

Stocks showed a substantial turnaround over the course of the trading session on Thursday, recovering from an early move to the downside to end the day sharply higher. The major averages added to the strong gains posted on Wednesday to reach their best closing levels in well over a month.

The major averages pulled back off their highs of the session going into the close but remained firmly positive. The Dow jumped 332.04 points or 1 percent to 32,529.63, the Nasdaq shot up 130.17 points or 1.1 percent to 12,162.59 and the S&P 500 surged 48.82 points or 1.2 percent to 4,072.43.

The early weakness on Wall Street came following the release of a Commerce Department report showing a continued contraction in U.S. economic activity in the second quarter of 2022.

The Commerce Department said real gross domestic product decreased by 0.9 percent in the second quarter after slumping by 1.6 percent in the first quarter. Economists had expected GDP to increase by 0.5 percent.

With GDP unexpectedly declining for the second consecutive quarter, the data signals the U.S. economy is in a technical recession.

However, economists cast doubt on whether the economy is actually in a recession, citing other indicators indicating continued growth and persistent strength in the labor market.

The data may have still added to optimism that the Federal Reserve will slow the pace of its interest rate hikes at future meetings, contributing to the turnaround on Wall Street.

“Stagflation is obviously here now and will ultimately force the Fed into a difficult decision as to when they may need to pause tightening,” said Edward Moya, senior market analyst at OANDA.

Despite the rebound by the broader markets, Meta Platforms (META) posted a steep loss after the parent of Facebook and Instagram reported weaker than expected second quarter results, including its first ever year-over-year drop in revenues.

Sector News

Networking stocks extended the strong upward move seen in the previous session, driving the NYSE Arca Networking Index up by 5 percent to its best closing level in almost three months.

Netgear (NTGR) helped lead the sector higher, spiking by 22.6 percent after reporting a narrower than expected second quarter loss on revenues that exceeded analyst estimates.

Interest rate-sensitive commercial real estate and utilities stocks also moved sharply higher, with the Dow Jones U.S. Real Estate Index and the Dow Jones Utilities Average surging by 3.3 percent and 3.1 percent, respectively.

Substantial strength was also visible among transportation stocks, as reflected by the 3.1 percent jump by the Dow Jones Transportation Average. The average reached its best closing level in well over a month.

Gold, brokerage, and chemical stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index rose by 0.4 percent, while China’s Shanghai Composite Index edged up by 0.2 percent.

Most European stocks also moved to the upside over the course of the session. While the U.K.’s FTSE 100 Index closed just below the unchanged line, the German DAX Index advanced by 0.9 percent and the French CAC 40 Index jumped by 1.3 percent.

In the bond market, treasuries gave back ground after an early rebound but remained in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.3 basis points to a three-month closing low of 2.681 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 Fed.

Traders are also likely to keep an eye on the latest earnings news, with Apple (AAPL), Amazon (AMZN) and Intel (INTC) among the companies releasing their quarterly results after the close of today’s trading.

Chevron (CVX), Exxon Mobil (XOM) and Procter & Gamble (PG) are also among the companies due to report their quarterly results before the start of trading on Friday.

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