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Dow jumps as jobless claims data eases rate worries

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Technology and growth stocks lifted Wall Street’s predominant indexes higher on Thursday after data pointing to signs of a cooling labor market eased worries over future rate of interest hikes by the Federal Reserve.

The Dow Jones Industrial Average soared 396 points, or 1.2%, to 33,272, the S&P 500 was up 1.8% and the Nasdaq was up 2.7%.

Megacap stocks Apple, Alphabet, Microsoft and Amazon gained between 1.5% and three%, also helped by a decline within the 10-year Treasury yield.

The Labor Department’s report showed initial claims for unemployment advantages rose 9,000 to a seasonally adjusted 225,000 for the week ended Dec. 24. Economists polled by Reuters had forecast 225,000 claims for the newest week.

The report hinted at some softening in an otherwise tight labor market, bolstering hopes that the US central bank would dial down its aggressive monetary policy stance.

“Signs of the job market starting to weaken is definitely apparent,” said Peter Cardillo, chief market economist, Spartan Capital Securities LLC.

“We’re at the top of the 12 months and in fact, the market has not performed well. We’re seeing some bargain hunting coming in today.”

Traders held on to bets of a 25 basis point rate hike from the Federal Reserve in February and see rates peaking at 4.92% in June 2023. 

The Cboe Volatility Index, referred to as Wall Street’s “fear gauge,” slipped, signaling an easing in investor anxiety.

A robust labor market and resilient American economy have fueled worries that rates of interest could stay higher for longer although easing inflationary pressures keep alive hopes of smaller increases.

The Fed’s aggressive rate hikes have hammered equities this 12 months, with the benchmark S&P 500 shedding 19.6% and tech-heavy Nasdaq losing nearly 33% in value.

Wall Street’s predominant indexes dropped over 1% on Wednesday, with the Nasdaq hitting a 2022 closing low as rising COVID cases in China and geopolitical tensions added to fears of a probable recession in 2023.

Nevertheless, investor preference for high-dividend yielding stocks with regular earnings have staved off a steeper decline within the industrials-heavy Dow Jones, which is down just 8.8% on the 12 months.

Tesla shares rose 8% after Chief Executive Elon Musk told staff they shouldn’t be “bothered by stock market craziness.” The stock continues to be down 66% for the 12 months.

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