Dow Jones and S&P 500 Rebound as Darden Surges 8% After Steep Losses

Wall Street Rebounds as Investors Digest Fed’s Slower Rate Path

U.S. equities recovered Thursday, reversing steep losses from the previous session as traders recalibrated expectations for the Federal Reserve’s monetary policy. Key economic data showing strong GDP growth and falling jobless claims bolstered market sentiment, while the dollar softened and gold rallied.

Broad-Based Gains in Major Indexes

 

At 17:34 GMT, the Dow Jones Industrial Average is trading 42462.29, up 135.42 or +0.32%. The S&P 500 Index is at 5886.00, up 13.84 or +0.24% and the Nasdaq is trading 19433.31, up 40.61 or +0.21%.

Despite these gains, all three indexes remain on track for weekly losses following the Fed’s announcement.

The S&P 500’s 2.95% plunge on Wednesday marked its worst Fed meeting day on record, according to Bespoke Investment Group, while the Dow experienced its longest losing streak since 1974.

Sector and Stock Highlights

Gains in financials, healthcare, and utilities led Thursday’s recovery. Bank stocks such as JPMorgan Chase and Bank of America performed strongly. Industrials also saw positive momentum, helping to stabilize broader markets.

In individual stocks, Darden Restaurants surged 8% after beating earnings expectations and raising full-year guidance. Conversely, Micron plunged 13% in premarket trading due to disappointing second-quarter guidance, and Lamb Weston dropped 18% following weak quarterly results.

Economic Data Signals Resilience

The U.S. economy showed surprising strength, with third-quarter GDP revised upward to an annualized 3.1%, exceeding the consensus estimate of 2.9%. Consumer spending rose 3.7%, a robust pace that highlights ongoing consumer confidence.

Labor market data also surprised to the upside. Weekly jobless claims fell to 220,000, below the expected 230,000, signaling continued strength. Continuing claims edged lower to 1.87 million.

Fed’s Hawkish Tone Weighs on Sentiment

The Federal Reserve’s revised forecast of only two rate cuts in 2024, down from four previously anticipated, fueled Wednesday’s selloff. Although the Fed trimmed rates by 25 basis points to a range of 4.25%–4.5%, Fed Chair Jerome Powell emphasized a cautious approach to future adjustments. Treasury yields climbed in response, with the 10-year yield hitting 4.566% on Thursday.

Powell’s comments reinforced the Fed’s commitment to combating inflation while maintaining a strong labor market, yet markets remain wary of high valuations and the broader economic impact of persistent rate uncertainty.

Market Forecast: Where Could Stocks Be Headed Next?

The short-term outlook appears cautious as investors digest the Fed’s stance and elevated valuations. Defensive sectors may continue to attract attention, while growth stocks could remain under pressure.

Treasury yields are likely to stay elevated, adding pressure to equities. Despite Thursday’s rebound, broader indexes could face renewed selling as traders adjust portfolios for 2024. A bearish bias may persist into year-end unless clear signs of monetary policy easing emerge.

More Information in our Economic Calendar.