U.S. stocks are showing signs of recovery on Thursday following a challenging day marked by significant losses. The S&P 500 saw a 0.4% uptick in morning trading, rebounding from a steep drop of 2.9% the previous day. This decline occurred after the Federal Reserve indicated it may implement fewer interest rate cuts next year than previously anticipated. Meanwhile, the Dow Jones Industrial Average rose by 194 points, or 0.5%, as of 10:05 a.m. Eastern Time, after experiencing a more than 1,100-point decline on Wednesday. The Nasdaq composite also gained 0.5%.
Despite the recent volatility, the indexes are still hovering near record highs, and the S&P 500 is on pace for a standout year. The prior day’s plunge tempered some market enthusiasm, which had already faced criticism for being excessively optimistic in light of high valuations.
Current trader expectations suggest that the Fed will likely execute only one or two interest rate cuts in the coming year, a shift from last month when many anticipated at least two cuts in 2025. Lower interest rates are typically favorable for the economy as they stimulate growth and support investment prices, but they can also elevate inflation risks.
Market movements on Thursday were buoyed by positive performances from several companies. Darden Restaurants, the parent company of Olive Garden, surged by 13.4% after reporting profits that exceeded analysts’ forecasts and offering a favorable revenue outlook for the fiscal year. Likewise, Accenture’s shares rose by 6.5% after the consulting firm reported strong profits, prompting a revenue forecast increase.
Amazon’s stock also increased by 1.6%, despite ongoing strikes by workers at seven company facilities, which are being touted as the largest strikes against Amazon in U.S. history. The company has stated that it does not expect any disruptions to operations during this critical time.
However, not all companies fared well. Micron Technology shares plummeted by 17.4% despite strong profits because its revenue fell short of market predictions, with the CEO projecting continued weak demand for the near future. Similarly, Lamb Weston declined by 19.1% after missing revenue and profit targets and projecting a continued drop in demand for frozen potato products.
In the bond market, yields exhibited mixed reactions following a spike in expectations regarding the Fed’s planned interest rate cuts. A report indicating a 3.1% annualized growth of the U.S. economy in the summer reassured some investors, despite mixed signals from the manufacturing sector in the mid-Atlantic region.
Long-term Treasury yields rose, impacting the housing market by sustaining higher mortgage rates. Homebuilder Lennar’s shares fell by 4.6% after reporting disappointing financial results. CEO Stuart Miller noted that while demand remained robust, rising mortgage rates presented affordability challenges.
Internationally, the FTSE 100 in London dropped by 1.2% following the Bank of England’s decision to hold interest rates steady amid inflation concerns. The Bank of Japan also maintained its benchmark interest rate, contributing to declines across Asian and European markets.
In summary, while U.S. stocks are stabilizing after a tumultuous day, market participants are acknowledging potential challenges ahead related to interest rates and economic forecasts. However, strong corporate performances from notable companies provide a glimmer of hope for sustained market resilience. Overall, resilience in the economy and positive corporate earnings can keep the momentum going as traders adjust to the evolving monetary landscape.