By David French and Shristi Achar A
(Reuters) -The S&P 500 and Dow Jones Industrial were on course for their first positive sessions of 2024 on Thursday, as financial stocks and strong jobs data prompted investors to delay estimates of when interest-rate cuts could begin.
The recovery in two of the main U.S. stock indexes follows a downbeat start to 2024, with the S&P 500 notching its worst two-day performance since late October on profit-taking after a blistering rally last year.
Bets that the Federal Reserve could start reducing rates this year had driven much of the gains toward the end of 2023, though the latest minutes from the central bank’s December policy meeting did not offer many clues on when the easing might commence.
Traders see a 66.4% chance for at least a 25-basis point (bps) rate cut in March and a near 93% probability for May, according to the CME Group’s FedWatch tool.
Financials led gains among the S&P 500 sectors with a 0.8% rise. The move was underpinned by Allstate, which hit an all-time high and was trading up 3.4% after Morgan Stanley lifted its rating on the insurer to “overweight.”
Other insurers also rose, with both American International Group and Hartford Financial Services Group <HIG.N> touching their highest levels since 2008. At mid-afternoon, they were up 0.9% and 1.7%, respectively.
Banks were strong performers ahead of the start of earnings season next week. JPMorgan Chase & Co hit a record high, and was up 1.2%, after BofA Global Research raised its price target. Truist Financial Corp advanced 1.7% after BofA upgraded its rating and price target.
An ADP National Employment report showed U.S. private employers hired more workers than expected in December, pointing to persistent strength in the labor market that should continue to sustain the economy.
Private payrolls increased by 164,000 in December, compared with a 101,000 rise the month before. Official U.S. employment data are due on Friday.
“Today’s numbers were a little muted. They weren’t something that says we need to cut rates tomorrow,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
“So what you’re seeing is people resetting expectations as to when those rate cuts will start.”
A weekly Labor Department report showed more Americans filed for state unemployment claims than expected.
Yields on longer-dated U.S. Treasuries rose after the data, with the yield on the benchmark 10-year note back close to 4% at mid-afternoon. [US/]
Investors also assessed the S&P Global’s final reading of composite PMI data for December at 50.9, compared with a preliminary reading of 51.0.
At 1:53 p.m. ET, the Dow Jones Industrial Average was up 140.2 points, or 0.37%, at 37,570.39, and the S&P 500 was up 6 points, or 0.13%, at 4,710.83. However, the Nasdaq Composite was down 8.1 points, or 0.06%, at 14,584.14.
Despite the overall positive tone, most S&P sectors were down, led by energy which fell 1.1% after a massive U.S. fuel inventory build pushed crude prices lower. [O/R]
Apple shares slid 0.8% after brokerage Piper Sandler downgraded the iPhone maker to “neutral”, days after Barclays also cut its rating.
Dow component Merck added 2.2% after TD Cowen upgraded the drugmaker to “outperform” on growth prospects.
Mobileye Global sank 26% after forecasting preliminary fiscal 2024 revenue below estimates, while Walgreens Boots Alliance shed 6.6% after the U.S. pharmacy chain nearly halved its dividend.
(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru and David French in New York; Editing by Devika Syamnath and Richard Chang)
