Dow Jones struggles as tech rally sees Nasdaq erase 2024 loss

U.S. stocks were mostly higher Thursday, with the Nasdaq Composite erasing a 2024 loss as shares of Apple and chip makers led a tech rally.

The Dow Jones Industrial Average struggled, however, losing ground as healthcare stocks sputtered.

What’s happening

  • The Dow
    DJIA
    trimmed its loss but remained down 24 points, or 0.1%, at 37,242.

  • The S&P 500
    SPX
    was up 24 points, or 0.5%, at 4,763.

  • The Nasdaq Composite
    COMP
    gained 181 points, or 1.2%, to trade at 15,038, putting it up 0.4% in the new year.

On Wednesday, the Dow fell 94 points, or 0.3%, the S&P 500 and Nasdaq Composite each shed 0.6%.

What’s driving markets

“After a rotten Wednesday for stocks and bonds, some stability is returning to markets today as traders take in better news about China and corporate communications turn more upbeat,” said Thierry Wizman, global foreign-exchange and interest-rates strategist at Macquarie.

Concerns about the health of China’s economy saw Hong Kong’s Hang Seng
HK:HSI
on Wednesday plunge 3.7% to its lowest since October 2022, but the new session saw the index rally 0.75%, with the mainland’s Shanghai Composite
CN:SHCOMP
also recovering some poise with a 0.4% gain.

Further good news came from Taiwan Semiconductor Manufacturing Company
2330,
+1.20%

TSM,
+8.12%,
which produced results that beat analysts forecasts. U.S.-listed shares
TSM,
+8.12%
jumped 8.3%, while fellow chip makers Advanced Micro Devices
AMD,
+1.55%,
up 2.2%, and Nvidia Corp.
NVDA,
+2.23%,
up 2.5%, also rallied.

Meanwhile, BofA Securities analyst Wamsi Mohan weighed in with a newly upbeat view of Apple Inc. stock
AAPL,
+3.08%
Thursday, upgrading it to buy from neutral amid longer-term optimism about the iPhone business. Shares rose 3.3%, on track for the largest one-day rise since May 5, according to Dow Jones Market Data.

The S&P 500 has endured a choppy start to the year, pulling back from near-record highs as investors pared expectations of interest rate cuts in coming months, forcing implied borrowing costs higher in the process.

The 10-year Treasury yield
BX:TMUBMUSD10Y
by midweek had jumped more than 30 basis points from its Dec. 27 low of 3.8%, after central bank officials pushed back against bets on interest rates cuts, and with its latest surge coming in response to stronger-than-expected U.S. retail sales data on Tuesday.

Yields briefly popped higher Thursday after data showed the number of Americans who applied for first-time unemployment benefits last week fell to 187,000 to the lowest in 16 months, showing that layoffs remain near record lows. Economists had forecast new claims in the week ending Jan. 13 to total 208,000.

“The story this week continues to be robust economic data, and how it may keep rate cuts on ice for a while,” said Chris Larkin, managing director for trading and investing at E-Trade from Morgan Stanley.

“Until we start to consistently see softer numbers, especially in the labor market, the Fed will likely stick to its higher-for-longer stance,” he said.

Healthcare stocks were a drag on the market and were pulling down the Dow, with shares of UnitedHealth Group
UNH,
-2.79%
off more than 3%.

The drop came after fellow health-insurance giant Humana Inc. 
HUM,
-12.31%
 cut its full-year 2023 earnings guidance and flagged rising medical costs and slower than expected 2024 Medicare Advantage enrollment growth. Humana shares fell 11.8%. Healthcare was the worst-performing S&P 500 sector, down 0.8%.

In other data, the Philadelphia Fed said its gauge of regional business activity inched up to negative 10.6 in January from negative 12.8 in the prior month. Any reading below zero indicates deteriorating conditions.

Housing starts fell to 1.46 million annual pace from 1.53 million in November, the government said Thursday. Economists had expected a rate of 1.43 million.

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