Wall Street Claws Back Some of Wednesday's Losses

NEW YORK (AP) -- Wall Street on Thursday is clawing back much of its sharp loss from the prior day, which was its first significant step back since a rally began in late October.

The S&P 500 was 0.9% higher in early trading, sitting 1.2% below its record set nearly two years ago. The Dow Jones Industrial Average was up 301 points, or 0.8%, a day after falling for the first time following five straight record-setting days. The Nasdaq composite was 1.1% higher, as of 9:35 a.m. Eastern time.

Micron Technology climbed 6.5% after reporting stronger results for the latest quarter than analysts expected and saying it sees business conditions improving throughout its fiscal year. CarMax was another winner, up 9.9% after it beat profit expectations despite what it called "persistent widespread pressures in the used car industry." The companies were toward the head of a widespread rally, where the vast majority of stocks were climbing.

In the bond market, Treasury yields continued to ease following a mixed set of reports on the economy. Falling yields have been one of the main reasons the stock market has charged so high the last two months. They relax the pressure on the financial system, encourage borrowing and boost prices for investments.

The yield on the 10-year Treasury slipped to 3.82% from 3.86% late Wednesday. In October, it had been above 5% and weighing heavily on markets.

Yields have been dropping on hopes that inflation has cooled enough for the Federal Reserve to not only halt its hikes to interest rates but to begin cutting them sharply next year. The Fed has hiked its main rate to the highest level in more than two decades, but officials released projections last week showing they see some cuts to rates coming in 2024.

Reports on Thursday painted a mixed picture of whether the Fed can indeed pull off the long-odds tightrope walk that Wall Street is hoping for: a slowdown in the economy powerful enough to high conquer inflation but not so strong that it causes a recession.

One report showed that slightly more U.S. workers applied for unemployment benefits last week, but the number was still below expectations and low relative to history. The hope at the Fed and on Wall Street is that the job market can cool by just the right amount so that it doesn't cause mass layoffs but likewise doesn't add upward pressure on inflation.

Another report showed manufacturing in the mid-Atlantic region is weakening by much more than expected. Manufacturing has been one of the hardest-hit areas of the economy. And a third report said the U.S. economy's growth during the summer wasn't quite as powerful as earlier estimated.

They "weren't earth-shattering numbers, but they were still in line with the narrative that a cooling economy will keep the Fed on track to cut rates in the not-too-distant future," said Chris Larkin, managing director, trading and investing at E-Trade from Morgan Stanley

"Right or wrong, that sentiment has played a big role in the market's recent surge, even though the Fed has been doing its best to temper expectations."

Wall Street has been ebullient about hopes that both a slew of rate cuts and a resilient economy will support stock prices. The S&P 500 has charged roughly 15% higher since just before Halloween, and it's on track for an eighth straight week of gains.

That's even though Fed officials have penciled in far fewer rate cuts than Wall Street has for 2024. Critics also say the number of rate cuts traders are expecting is unlikely unless the economy falls into a recession, which some on Wall Street still see as an inevitable consequence of all the big rate hikes already instituted by the Federal Reserve.

That's raised criticism that stocks have simply gone too far, too fast and become too expensive relative to profits that companies are earning.

In stock markets abroad, indexes were mostly lower in Europe and Asia. China was an exception, with stocks ticking 0.6% higher in Shanghai to trim its loss for the year by a bit. It's one of the few markets globally that has not climbed sharply in 2023 amid hopes for easing inflation.