By Mark DeCambre
U.S. stocks ended higher on Thursday, after a frenetic session of trading that saw the benchmark indexes dig out of deep hole earlier in the day as investors weighed improving economic data with the country emerging from the COVID pandemic.
Evidence of a recovering economy of late has prompted a sharp rise in U.S. Treasury yields in the past couple of months and has led to end-of-quarter fund rebalancing out of stocks and into bonds and yields have drifted lower this week.
How are stock benchmarks performing?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.37% closed 199.42 points, or 0.6%, higher at 32,619.48, but had been down by as many as 348 points at Thursday’s nadir at 32,071.41.
The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.87% rose 20.38 points to end at 3,909.52, a rise of 0.5%, well off its intraday low at 3,853.50.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.08% closed at 12,977.68, up 15.79 points for a gain of 0.1%, well off its session low at 12,786.81.
The Russell 2000 index /zigman2/quotes/210598147/delayed RUT -0.43% , a gauge of small-captialization stocks, finished up 2.3% at 2,183.12, coming off an intraday low at 2,100.27.
On Wednesday , the Dow closed 3 points lower, virtually unchanged at 32,420.06, the S&P 500 fell 21.38 points, or 0.6%, ending at 3,889.14, while the Nasdaq Composite Index shed 265.81 points to finish at 12,961.89, a decline of 2% and the small-capitalization Russell 2000 index /zigman2/quotes/210598147/delayed RUT -0.43% shed 51.42 points, or 2.4%, ending at 2,134.27.
What drove the market?
Major equity indexes managed to post a gain on Thursday in volatile trading as weekly first-time jobless claims hit the lowest level in over a year and a reading on fourth-quarter gross domestic product was raised to 4.3%, beating consensus estimates of 4.1%.
Despite the better-than-expected data investors seemed reluctant to quickly adopt a bullish stance on the news, with stocks tanking in early morning action.
“Like we’ve seen since the last SPX high on 3/17, the market continues to feel directionless as traders and investors try to determine what the main driver will be going forward. Until that happens, I expect more volatility and more intraday reversals,” Randy Frederick, managing director of trading and derivatives at Charles Schwab, told MarketWatch.
The choppy trade in stock markets this week has been partly attributed to quarter-end rebalancing and a rotation in and out of sectors that are expected to perform better when the economy stages a more pronounced recovery from the COVID-19 pandemic. Schwab’s Frederick said that the current level of the Cboe Volatility Index VIX , known as the VIX, implies more choppiness ahead for markets.
Few strategies have proven successful in recent trades, with both growth stocks and value plays getting equally hammered in recent trading action. “At its current level around 20, the VIX is implying intraday price swings in the SPX of about 41 points per day, although we’ve exceeded that in each of the last 3 days,” he said.
Weekly data showed that the number of people seeking unemployment benefits for the period ended March 20 totaled 684,000, marking the first time the number has been below 700,000 since March , when the public-health crisis took a significant hold of the economy. Economists surveyed by Dow Jones had expected 735,000 applications from 770,000 in the period before.
The jury is out on what that upbeat data means for investors, with stocks sliding early in the session but then recovering as rotation out of technology stocks and into stocks seen benefiting from businesses reopening as vaccinations rollout resulted in intraday volatility.
“In reality, a return to normal could already be priced in and when you consider that half of the Fed’s mandate is to support job growth, the signs of strength from today’s jobless claims read may actually have a perverse effect on the broader market,” wrote Mike Loewengart, managing director investment strategy at E-Trade Financial, in emailed remarks.
That said, investors may still take heart in the Federal Reserve’s stated commitment to keep interest rates low until the economy fully recovers from the pandemic.