The Dow and S&P 500 Look to Snap Their Three-Day Losing Streak as Nasdaq Shares Lead the U.S Market Higher

U.S. stock markets showed signs of recovery on Thursday after experiencing three consecutive days of losses for both the Dow and S&P 500. Traders were optimistic about the upcoming November jobs report, anticipating further improvement in the labor market.

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As of the latest trading data:

• The Dow Jones Industrial Average (DJIA) gained 30 points, or 0.1%, reaching approximately 36,085.
• The S&P 500 (SPX) saw an increase of 31 points, or 0.7%, reaching 4,581.
• The Nasdaq Composite (COMP) rose by 171 points, or 1.2%, reaching 14,316.

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Despite a five-week positive trend, U.S. stocks seemed poised to finish the week with a decline, with the S&P 500 facing a 0.4% weekly drop and the Dow down by 0.5%. The Nasdaq Composite remained relatively unchanged for the week.

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Market Dynamics:U.S. stocks aimed to regain momentum from the positive trend observed in November. However, some traders expressed concerns that the market may be overextended, given that it experienced one of the most successful months in the past decade.

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There is apprehension that the market might have prematurely priced in up to five interest-rate cuts from the Federal Reserve in 2024. This shift in expectations led to a surge in stock prices over the past month and a simultaneous plunge in Treasury yields.

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Earlier in the week, data on job openings and private-sector payrolls were released, providing support to the stock market by reinforcing expectations that the upcoming jobs report from the Labor Department could fall below expectations. This anticipation could potentially pave the way for interest-rate cuts in the coming year.

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Michael Lebowitz, a portfolio manager at RIA Advisors, noted that recent weak reports for ADP and JOLTS have led the market to anticipate a lower-than-expected jobs report. The market's interpretation is that the Federal Reserve is more likely to ease and refrain from raising interest rates.

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Lebowitz cautioned investors about their expectations, pointing out that, contrary to popular belief, rate cuts often result in a market reaction opposite to the expected positive impact on stock prices.

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A labor-market update on Thursday included weekly data on jobless claims, revealing that the number of Americans applying for unemployment benefits remained nearly unchanged at 220,000.

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Tech stocks, such as Alphabet Inc. and Advanced Micro Devices, led the market on Thursday, contributing to the gains on the Nasdaq Composite. Meanwhile, the Dow experienced a boost from a surge in shares of Walgreens Boots Alliance Inc., although weakness in other constituents, including UnitedHealth Group, offset some of the positive momentum.

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Lebowitz observed a dynamic where either the Dow or the Nasdaq rose during the week, indicating that mutual funds might be adjusting their holdings away from this year's market leaders.

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Beyond U.S. stocks, investors closely monitored global bond yields after the Bank of Japan signaled a potential exit from its ultraloose monetary policy, causing local bond yields to surge and impacting global debt markets.

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The Nikkei 225 equity index fell 1.8%, the Japanese yen jumped 1.3%, and 10-year Japanese government bond yields spiked by 11 basis points. This move followed lower inflation and signs of a cooling labor market, contributing to a decrease in benchmark 10-year Treasury yields from a 16-year high of 5% in October to nearly 4.1% during the current session.

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In other markets, crude-oil futures were higher, though the U.S. benchmark remained below $70 a barrel. Noteworthy companies reporting earnings on Thursday included Broadcom, Lululemon, and DocuSign after the close.