U.S. stock markets showed mixed performance on Thursday, as the Nasdaq Composite reversed its losses for the year, driven by a surge in Apple and chipmaker shares, while the Dow Jones Industrial Average faced challenges, primarily due to underperforming healthcare stocks.
Here's a breakdown of the market movements:
The previous day saw a decline in the Dow by 94 points (0.3%), with both the S&P 500 and Nasdaq Composite shedding 0.6%.
Market analysts attribute the current stability in the market to improved news about China and a more optimistic tone in corporate communications. Concerns over China's economic health led to a 3.7% plunge in Hong Kong's Hang Seng on Wednesday, but the new session saw a 0.75% rally, with the mainland's Shanghai Composite also recovering with a 0.4% gain.
Taiwan Semiconductor Manufacturing Company (TSMC) reported results that exceeded analysts' forecasts, contributing to positive sentiment. U.S.-listed shares of TSMC surged by 8.3%, while other chipmakers, including Advanced Micro Devices (AMD) and Nvidia Corp., also rallied.
Apple Inc. received an upgrade from BofA Securities analyst Wamsi Mohan, shifting its stock rating from neutral to buy based on long-term optimism about the iPhone business. This led to a 3.3% rise in Apple's shares.
The S&P 500 encountered a volatile start to the year, stepping back from near-record highs. Investors adjusted their expectations for interest rate cuts, causing implied borrowing costs to rise. The 10-year Treasury yield rose more than 30 basis points from its late December low, driven by central bank officials pushing back against rate cut expectations and strong U.S. retail sales data.
Positive economic indicators continued with the lowest first-time unemployment benefits applications in 16 months, falling to 187,000. This suggests that layoffs remain at near-record lows, prompting discussion about the potential delay in interest rate cuts.
Chris Larkin, managing director for trading and investing at E-Trade from Morgan Stanley, emphasized the theme of robust economic data impacting rate cut expectations. He suggested that until softer numbers, especially in the labor market, emerge consistently, the Federal Reserve is likely to maintain its higher-for-longer stance on interest rates.
Healthcare stocks, particularly UnitedHealth Group, weighed down the market, causing a drag on the Dow. UnitedHealth Group shares were down more than 3%, and the broader healthcare sector was the worst-performing in the S&P 500, experiencing a 0.8% decline.
Humana Inc., a major health insurance company, contributed to the healthcare sector's poor performance by cutting its full-year 2023 earnings guidance and highlighting rising medical costs and slower-than-expected 2024 Medicare Advantage enrollment growth. This led to an 11.8% decline in Humana shares.
Additional economic data revealed that the Philadelphia Fed's gauge of regional business activity inched up to negative 10.6 in January, indicating slightly improved conditions compared to the prior month. Housing starts fell to a pace of 1.46 million annually, down from 1.53 million in November, though still surpassing economists' expectations of 1.43 million.
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