Stocks surged on Wednesday, with the Dow Jones Industrial Average achieving its seventh consecutive day of gains. This rally was fueled by new jobless claims data that sparked optimism about potential Federal Reserve rate cuts later in the year.
The Dow climbed 331.37 points, or 0.85%, closing at 39,387.76, marking its longest winning streak since a nine-day run in December. The S&P 500 rose by 0.51% to end at 5,214.08, while the Nasdaq Composite increased by 0.27%, finishing at 16,346.26.
Leading the Dow’s ascent were Home Depot and Caterpillar, with both stocks rising more than 2%.
The optimism was driven by fresh weekly jobless claims data, which reached its highest level since August. This increase in claims led to heightened expectations that the Federal Reserve might consider cutting interest rates later this year.
Additionally, strong demand in a bond auction contributed to driving yields lower. The yield on the 10-year Treasury fell by 3 basis points to approximately 4.45%, while the 2-year Treasury yield also dropped by 3 basis points to around 4.81%.
“A bit of softness in the data gives the Fed a window to follow through with its dovish bias,” said Phillip Colmar, global strategist at MRB Partners. He noted that the market interpreted the jobless claims data positively. “As long as bond yields aren’t threatening, it’s a green light. The Fed and the bond market have given a green light together to buy risk, or continue to buy risk.”
Earlier in the day, a series of quarterly earnings reports came in below Wall Street’s expectations, briefly dampening investor sentiment. Despite reporting misses on both the top and bottom lines, Warner Bros Discovery saw a 3% increase. Conversely, semiconductor company Arm experienced a decline of more than 2% due to lackluster revenue guidance. Airbnb dropped over 6% after weak guidance overshadowed its first-quarter beat.
In summary, Thursday’s stock market rally was driven by positive interpretations of jobless claims data and strong demand in the bond market, which together fueled hopes for future rate cuts by the Federal Reserve. Leading gains in the Dow were Home Depot and Caterpillar, while mixed earnings reports had varied impacts on individual stocks.