vxxgraphical chart of VIXX, the volatility index

Optimism returned to Wall Street on Thursday, as investors shrugged off rising economic worries and a warning from Microsoft to send stocks sharply higher. The advance revived the sentiment that prompted a substantial rebound last week, cutting losses after the selling that has marked most of 2022 so far.

Wall Street saw upbeat sentiment through most of pre-market trading but suffered a setback after Microsoft released reduced guidance. The major averages recovered from that early stumble, however, rallying through much of the rest of the day, with Friday’s jobs data now in focus.

The Dow Jones (DJI) finished +1.3%, S&P 500 (SP500) ended +1.8% and Nasdaq (COMP.IND) closed +2.7%.

The Nasdaq rose 322.44 points to close at 12,316.90. The Dow Jones advanced 435.05 points to finish at 33,248.28. The S&P 500 concluded trading at 4,176.82, climbing 75.59 points on the session.

Ten of the 11 S&P 500 sectors posted gains, led by a 2.9% rise in Consumer Discretionary. Communication Services, Info Tech and Materials all climbed at least 2.4% as well. Energy was the lone holdout and even that segment only posted a fractional decline.

Microsoft cut Q4 revenue and earnings expectations due to forex headwinds. Meanwhile, investors continued to debate the likelihood of a recession and the best way to play the Federal Reserve’s rate-hiking campaign.

“Despite many macro commentators confusing equity market volatility with business cycle risk, the data has consistently refuted the near-term recession narrative,” MKM’s Michael Darda wrote.

“Once again, we need to unshackle ourselves from the Pavlovian reaction function of the last cycle in which rates of change in macro momentum indicators were closely associated with risk-on/risk-off events with any sustained tightening in financial conditions unwelcome by the central bank (so-called Fed Put),” Darda said. “That’s the playbook when there is no (or low) growth, no (or low) inflation, and a Fed that is failing to the downside (not the upside) on its inflation target. We have argued repeatedly for more than a year: market commentators analyzing the current backdrop through the prism of the 2009-2019 cycle are, in a phrase, ‘doing it wrong.'”

Employment figures dominated this morning’s economic indicators a day ahead of the May payrolls report.

May ADP jobs data showed a gain of 128K vs. the 240K consensus and 202K prior figure that was revised to 247K. Furthermore, Initial Jobless Claims fell 11K to 200K, compared to the expected 210K numbers that were anticipated.

“The US labor market is still going strong,” Gregory Daco, chief economist at EY Parthenon said. “Initial claims of #unemployment benefits fell back to 200k in late May, layoffs remain at record low levels per #JOLTS report, and payroll gains are likely to be cooler but still robust in tomorrow’s #jobsreport.”

Among active stocks, Hewlett Packard Enterprise was among the biggest S&P decliners after weak results and guidance.

Stocks mentioned in article:

finviz dynamic chart for MSFT finviz dynamic chart for HPE

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