© Reuters. FILE PHOTO: The Wall Street sign is pictured at the New York Stock exchange (NYSE) in the Manhattan borough of New York City, New York, U.S., March 9, 2020. REUTERS/Carlo Allegri//File Photo
By David French
(Reuters) – The Dow Jones Industrial closed up on Thursday, as financial stocks and strong jobs data prompted investors to delay estimates of when interest-rate cuts could begin.
However, the chalked up its third straight loss, extending its bleak start to the year, as tech-focused investors continued to take profits after a blistering rally in the final weeks of 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.
Investors remained cautious on Thursday, and a tick-up in yields on longer-dated U.S. Treasuries – the benchmark 10-year note was back close to 4% – prompted traders to move away from growth stocks toward other sectors. [US/]
Financials was among the leading gainers among the sectors, underpinned by Allstate (NYSE:), which hit an all-time high after Morgan Stanley lifted its rating on the insurer to “overweight.”
Other insurers also rose, including both American International Group (NYSE:) and Hartford Financial Services Group (NYSE:), which closed at levels last seen in 2008.
Banks were strong performers ahead of the start of earnings season next week. JPMorgan Chase & Co (NYSE:) and Truist Financial (NYSE:) Corp were among those which advanced, after both received positive analyst reports from BofA Global Research.
Last year was one of substantial upheaval in the banking sector, as institutions managed the impact of rapid increase in central bank rates on their balance sheets.
Banks should see benefits in 2024 from lower-yielding investments rolling off and being reinvested in new securities with higher yields, said Ian Lapey, portfolio manager of The Gabelli Global Financial Services Fund.
Coupled with rotation out of more speculative, growth names, banks with strong management teams will reward investors, he added.
“We’re setting up for significant relative outperformance of the strongly managed and financed banks and other financials, as compared to other, more expensive areas of the market,” Lapey said.
Among the latest economic data, the 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. This came ahead of official U.S. employment data due on Friday.
Meanwhile, the weekly Labor Department report showed more Americans filed for state unemployment claims than expected.
According to preliminary data, the S&P 500 lost 15.11 points, or 0.32%, to end at 4,689.70 points, while the Nasdaq Composite lost 82.83 points, or 0.57%, to 14,509.39. The Dow Jones Industrial Average rose 20.69 points, or 0.06%, to 37,450.88.
Despite the overall positive tone, most S&P sectors were down, led by energy which fell after a massive U.S. fuel inventory build pushed crude prices lower. [O/R]
Apple shares (NASDAQ:) slid after brokerage Piper Sandler downgraded the iPhone maker to “neutral,” days after Barclays also cut its rating.
Mobileye Global (NASDAQ:) sank after forecasting preliminary fiscal 2024 revenue below estimates, while Walgreens Boots Alliance (NASDAQ:) dropped after the U.S. pharmacy chain nearly halved its dividend.
(This story has been corrected to remove reference to Thursday’s close as Dow’s first higher close of 2024 in the headline and paragraph 1)