Wall Street's benchmark indexes closed higher on Thursday despite market turbulence early into the day.
The Dow Jones ended the session at 33,153.91, gaining 108.82 points or 0.33 percent, while the tech-heavy Nasdaq closed higher for the second consecutive day at 11,590.40 after gaining 83.33 points or 0.72 percent.
Likewise, the S&P 500 closed at 4,012.32, increasing by 21.27 points or 0.53 percent to end its four-day losing streak, its longest negative stretch since December 2022. The S&P 500 previously traded below the 4,000 level for two straight days on Tuesday and Wednesday.
Many of the 11 major sectors in the S&P 500 index gained on Thursday, with energy being one of the best performers thanks to higher crude oil prices. Previously, the energy sector closed in the red for seven straight sessions, its worst run since March 2017.
The communication sector was among the worst performers in the S&P 500, posting its fifth consecutive loss. Streaming service Netflix became the biggest weight in the sector after the company reported that it would cut subscription fees in 30 countries.
EBay shares also slid by 5.22 percent after the company forecasted significantly lower demand for the first half of the year due to a decline in consumer spending in the U.S. and Europe.
The S&P traded below the 50-day moving average of 3,980 points earlier on Thursday before rallying later in the afternoon. Charlie McElligott, a strategist at financial service firm Nomura, said large trades in short-dated derivatives were responsible for the intraday decline.
Analysts believe that a positive earnings report from chipmaker Nvidia helped restore the market's confidence. Nvidia shares surged after projecting higher sales than earlier estimates for the quarter and reporting a jump in its chip demand to power artificial intelligence services. Other chipmakers, such as Broadcom and Qualcomm, also closed higher.
After ending January with gains, three Wall Street benchmark indexes become volatile in February as the market predicts that the Federal Reserve will maintain its hawkish monetary policy longer than previously anticipated.
Recent economic data showed that inflation had slowly cooled down, but the U.S. economy remained strong. The U.S. Labor Department reported on Thursday that the number of unemployment claims filed last week fell "unexpectedly," suggesting a tight job market.
On the other hand, the U.S. gross domestic product rose by 2.7 percent in the last quarter of 2022 — against the initial projection of 2.9 percent. According to analysts, the rising inventory levels contributed to most of the increase.
"If you're a bull, you can pull out plenty of things that are supportive, and if you're bear there are plenty of things to point to that are supportive,"
Jack Janasiewicz
Natixis Investment Managers Solutions lead portfolio strategist Jack Janasiewicz explained that due to conflicting data, it is difficult for the market to settle on certain strategies, resulting in "range-trading," as seen in recent days.
"If you're a bull, you can pull out plenty of things that are supportive, and if you're bear there are plenty of things to point to that are supportive," Janasiewicz said.
Central bank's fight against inflation
The Fed began a tightening cycle in March last year to bring down inflation to the target rate of two percent. Since the cycle began, the central bank has raised benchmark interest rates consecutively, with the latest increase being a quarter of a point percentage hike.
Per the recent minutes published by the central bank for its rate-setting meeting in February, most Fed officials agreed that further rate hikes would be necessary to tame inflation. The central bank is expected to hike rates two more times in the coming months, bringing the federal funds rate to the range of 5.25 to 5.5 percent by July.