Wall St ends sharply higher, rebounding with a boost from chips

The day of hedging and hesitation turned out to be just a day as, with the Q3 GDP data announced today, things did indeed turn on a dime with all the indexes hugely rebounding. The day started with a bang, the Dow up some 300, then lost almost all of it by 1 p.m. before regaining it all by close.  It wasn’t just “buying the dip.”  The GDP numbers came in less robust than expected and the tight labor market showed signs of cracks, both good news on the inflation front. 

After just one day, optimism has returned that the Fed plan remains on track and the odds of a March rate cut are now at 71.3%.  Confidence remains that stocks “will end the year strongly.” The S&P is once again within 1/2% of its all-time high, the official technical metric for declaring a bull market. Friday’s PCE report will complete the inflation picture.  Volume was below average at 10.88 billion. 

Wall St ends sharply higher, rebounding with a boost from chips

By Stephen Culp

Thu December 21, 2023 4:21 PM

DJ: 37,082.00  -475.92         NAS: 14,777.94  -225.28        S&P: 4,698.35  -70.02      12/20

DJ: 37,404.35  +322.35        NAS: 14,963.87  +185.92       S&P: 4,746.75  +48.40     12/21

NEW YORK, Dec 21 (Reuters) - U.S. stocks closed higher on Thursday, winning back much of the previous day's losses, as economic data fueled optimism that the Federal Reserve would ease monetary policy and revived investor risk appetite.  All three major U.S. stock posted gains as chips surged, led by Micron Technology (MU.O) after its better-than-expected quarterly forecast, putting the tech-heavy Nasdaq (.IXIC) out front.  The rally gained momentum as the session drew to a close, with the S&P 500 (.SPX) and the Nasdaq surging more than 1%.

Data on Thursday showed third-quarter U.S. economic growth was not as robust as originally stated, and cracks are appearing in the tight labor market, which the Fed considers an obstacle to cooling inflation.

"The fact that the third-quarter GDP number wasn't revised upward, and in fact was cut, is giving investors comfort that the path the Fed is on, which they enunciated last week, isn't going to change any time soon," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.  U.S. stocks abruptly sank late Wednesday afternoon, snapping a multi-session rally, in a sell-off possibly accelerated by hedging activity associated with short-dated option trades.

"The investor narrative yesterday was about profit taking on the heels of a very long consistent holiday rally," said Greg Bassuk, chief executive of AXS Investments in New York.  "Investors would be prudent to buy on these dips," Bassuk said, adding that he believes stocks "will end the year strongly."  Financial markets are pricing in a 71.3% likelihood that the U.S. central bank will reduce the Fed funds target rate by 25 basis points as soon as March, according to CME's FedWatch tool.  The market is awaiting the Commerce Department's personal consumption expenditures (PCE) report due on Friday, which will cover income growth, consumer spending and inflation.

The Dow Jones Industrial Average (.DJI) rose 322.35 points, or 0.87%, to 37,404.35, the S&P 500 (.SPX) gained 48.4 points, or 1.03%, at 4,746.75 and the Nasdaq Composite (.IXIC) added 185.92 points, or 1.26%, at 14,963.87.  All 11 major sectors of the S&P 500 ended in positive territory, and consumer discretionary stocks (.SPLRCD) enjoyed the biggest percentage gains. 

Micron Technology (MU.O) forecast quarterly revenue above market estimates, and its shares jumped 8.6% on signs of a memory chip recovery in 2024 after one of the most significant downturns in years.

The Philadelphia SE semiconductor index (.SOX), housing chip stocks, advanced 2.8%.  U.S. electric vehicle makers Tesla (TSLA.O), Lucid Group (LCID.O) and Rivian Automotive (RIVN.O) rose between 1.6% and 3.0% after a report said the United States was considering tariff hikes on Chinese EV manufacturers.  Triumph Group (TGI.N) soared 32.9% after the aerospace supplier said it would sell its components aftermarket business to AAR Corp (AIR.N) for $725 million.  U.S.-listed shares of Blackberry tumbled 12.7% after its fourth-quarter revenue estimates landed below expectations. 

Advancing issues outnumbered decliners on the NYSE by a 3.65-to-1 ratio; on Nasdaq, a 2.79-to-1 ratio favored advancers.  The S&P 500 posted 17 new 52-week highs and one new low; the Nasdaq Composite recorded 79 new highs and 68 new lows.

Volume on U.S. exchanges was 10.88 billion shares, compared with the 12.28 billion average for the full session over the last 20 trading days.