US stocks experienced a significant rebound on Thursday, recovering much of their recent losses, as investor fears regarding an AI spending slowdown and the impact of interest-rate hikes subsided. This surge was primarily driven by a broad, tech-led rally, with the Nasdaq Composite leading the gains. The Dow Jones Industrial Average rose between 316.14 points (0.61%) and 366.48 points (0.71%), closing at approximately 51,778.04 to 51,828.44. The S&P 500 gained between 85.12 points (1.13%) and 85.95 points (1.14%), reaching about 7,636.93 to 7,637.76. The tech-heavy Nasdaq Composite saw the largest increase, adding between 421.14 points (1.62%) and 439.87 points (1.69%), closing around 26,399.68 to 26,418.30.
The market's positive movement was largely attributed to a decline in oil prices and a dip in US Treasury yields. Crude oil futures fell by 52 cents to $101.91 a barrel, with Brent crude sliding 2.3% to $103.38. This eased concerns about energy inflation, which had been a major headwind for the global economy. The yield on the 10-year Treasury fell to 4.95% from 5.01% late Wednesday. Robert Pavlik, senior portfolio manager at Dakota Wealth, noted that investors were "stepping in, doing a little bit of buying on the pullback" in areas of the market hit hard by the anticipation of the Federal Reserve's rate hike.
Investor confidence was also bolstered by the Federal Reserve's unanimous decision to raise the federal funds target rate for the first time since July 2023. While this initial rate hike caused some market volatility, Fed Chair Kevin Warsh's re-emphasis on the Fed's independence and commitment to achieving its 2% inflation goal, coupled with solid labor data showing initial jobless claims near 1969 lows, reassured investors. Financial markets are now pricing in a 53.1% likelihood of another 25-basis-point rate hike at the Fed's October meeting, up from 27.2% a week ago, according to CME's FedWatch tool.
Chip stocks and artificial intelligence (AI) related companies were among the clear outperformers, staging a strong comeback after an earlier selloff. Micron Technology shares soared 8.3%, while AI chipmakers Marvell Technology and Arm Holdings' U.S.-listed shares were up 5% and 4.9%, respectively. Nvidia climbed 2.5%, and Advanced Micro Devices rose 5.8%. Gold and silver miners also saw gains of more than 3%. Crypto-linked stocks also rose, with Circle Internet Group and Robinhood up 5.8% and 5.2% respectively, and Coinbase advancing 5.8%, following the SEC's announcement of a five-year exemption for tokenized stock trading. Volume on U.S. exchanges was 17.57 billion shares, exceeding the 20-day average of 15.37 billion shares.
