Closing Market Update

(Thursday market close) U.S. stocks rose broadly Thursday, ending three-day losing streaks for the S&P 500® Index (SPX) and the Dow Jones Industrial Average ® (DJI), a day ahead of a critical Nonfarm Payrolls report that's expected to shape the path of Federal Reserve policy and interest rates into 2024.

Technology led Thursday's strength, as sharp gains in shares of Google parent Alphabet (GOOGL), Advanced Micro Devices (AMD) and other companies serving artificial intelligence helped lift the Nasdaq Composite® (COMP) to its highest close since late July.

Investors otherwise looked ahead to Friday's Labor Department Employment Report for November, which precedes the Fed's policy meeting next week. Nonfarm payrolls are expected to have increased about 180,000 last month, according to Trading Economics, which would be a slight acceleration from 150,000 in October. Softer-than-expected numbers in other job market indicators earlier this week fueled beliefs the Fed could be poised to lower rates in early 2024.

"If the report comes in worse than expected, it would not be surprising to see expectations for rate cuts to be pulled forward slightly," says Cooper Howard, director of fixed income Strategy at the Schwab Center for Financial Research. "However, we would caution from overreacting from one single report."

Here's where the major benchmarks ended:

• The S&P 500 Index was up 36.25 points (0.8%) at 4,585.59; the Dow Jones Industrial Average was up 62.95 points (0.2%) at 36,117.38; the Nasdaq Composite was up 193.28 points (1.4%) at 14,339.99.
• The 10-year Treasury note yield (TNX) was up about 2 basis points at 4.144%.
• The Cboe® Volatility Index (VIX) was up 0.09 at 13.06.

Tech sector strength was highlighted by the Philadelphia Semiconductor Index (SOX), which gained nearly 3%. Financial shares were also among the strongest performers, as the KBW Regional Banking Index (KRX) rose 2% and ended at a four-month high. In other markets, WTI crude oil futures (/CL) posted the market's first gain in six days after earlier dropping to its lowest level since late June.

The following companies had stock price moves driven by quarterly earnings, analyst ratings, or other news:

• AbbVie (ABBV) rose 1.1% after the pharmaceutical company said it would acquire neuroscience drugmaker Cerevel Therapeutics for $8.7 billion.
• Advanced Micro Devices rose 10% after the company announced new chips designed to serve growing demand for generative AI.
• Alphabet rose 5.3% a day after the Google parent announced Gemini, which the company said is its "largest and most capable" AI model and will be used to power the Bard chatbot and other products.
• Chewy (CHWY) fell 0.6% after the online pet products retailer reported quarterly results that fell short of expectations.
• JetBlue Airways (JBLU) rallied 15% after the airline, in a filing with regulators, forecast a smaller-than-expected revenue drop for the current quarter. Demand for travel "remains healthy" and bookings since late October have outperformed expectations, JetBlue said.

Among other companies, software and semiconductor provider Broadcom (AVGO), was expected to report results after Thursday's close. Broadcom shares gained 2.1% Thursday and are up 65% so far this year behind a wave of AI-driven bullishness.

Next week's earnings slate features two other tech bellwethers, enterprise IT leader Oracle (ORCL), which is expected to report results Monday, and digital publishing software maker Adobe (ADBE), scheduled for Wednesday. Oracle and Adobe shares have climbed 38% and 81% this year, respectively.

Friday's payrolls report caps a heavy week of labor market data and will be widely scrutinized for confirmation whether the Fed's aggressive rate hikes are slowing a job market that's been unexpectedly resilient for much of this year.

The payrolls report also comes out ahead of the next Federal Open Market Committee (FOMC) meeting, which concludes Wednesday and is expected to end with no increase in benchmark rates.

Earlier this week, lower-than-expected figures in ADP's National Employment Report for November and in the Labor Department's Job Openings and Labor Turnover Survey (JOLTS) strengthened market conviction that the Fed won't need to boost rates further to tame inflation.

Rather, many investors now appear to foresee the Fed cutting rates, possibly as soon as March. The market is factoring in about five rate cuts in 2024, up from about three just a little over a month ago, Cooper says. But investors may be getting ahead of themselves.

Recent signs of job market slowdown have led to expectations for a potential Fed rate cut being "pulled forward," Cooper says, "but we think that’s premature."

"We expect the first rate cut to occur in the second quarter or late in the third quarter," Cooper adds, with three to four cuts expected for all of 2024.

Late Thursday, futures trading reflected near-100% odds the FOMC will keep its benchmark funds rate target unchanged at 5.25% to 5.50% following next week’s meeting, according to the CME FedWatch Tool. The indicator also shows combined odds of 61% that the fund's target rate will either be 25 or 50 basis points lower by the end of the FOMC meeting in March.

Friday's report is also expected to show the November unemployment rate at 3.9%, unchanged from October, and average hourly earnings growth of about 0.3%, up from a 0.2% month-over-month gain in October.