US stocks soared on Thursday on the release of more economic data suggesting the Federal Reserve will continue with its monetary policy tightening program.
The blue-chip S&P 500 closed 0.5% higher and the tech-heavy Nasdaq Composite added 0.7%. A rally at the open dissipated in the late morning, but stocks rose again after midday.
U.S. chipmaker Nvidia jumped 14% after its fourth-quarter results released on Wednesday beat analysts’ expectations and the company signaled plans to push further into the artificial intelligence sector.
Shares of Nvidia’s counterpart in Asia and Europe also rose, with Taiwan Semiconductor Manufacturing adding 2% and the Netherlands’ ASML up 0.3%. The Philadelphia Semiconductor Index, which tracks 30 semiconductor companies, rose 3.3%.
Investors say that despite strong earnings growth in the United States, a recession is still in sight.
“Earnings have been resilient, which doesn’t surprise us,” said James Ashley, head of international markets strategy at Goldman Sachs Asset Management. “If a recession does occur, it will be mid to late in the year, and the depth and duration will likely be shorter and shallower.”
Data released on Thursday showed jobless claims fell to 192,000, below analysts’ forecasts and to less than 200,000 for the sixth consecutive week, a sign of continued tightness in the labor market.
US Treasury yields fell slightly, with 10-year notes at 3.88% and two-year notes, which are more sensitive to monetary policy, at 4.70%. Bond prices rise when yields fall.
New York Federal Reserve Chairman John Williams was the latest central bank official to hint at higher interest rates for longer, stressing on Wednesday the importance of using monetary policy to achieve the central bank’s 2% inflation target.
“Our job is clear, our job is to make sure that we restore price stability, which is truly the foundation of a strong economy,” he said.
Earlier in the week, stocks fell after investors judged the Fed would hold rates higher longer to rein in inflation. The S&P 500 and Nasdaq are down 1.6% and 1.7%, respectively, so far this week.
Minutes from the Fed’s January monetary policy meeting, released on Wednesday, showed most officials supported the decision to raise benchmark interest rates by 0.25 percentage points and a few preferred an increase of half a point. However, the meeting came ahead of a batch of economic data released in recent weeks that showed the economy was more resilient than economists had expected.
“At [Federal Open Market Committee] itself, the market was looking for something dovish to cling to,” ING analysts said. “Based on the minutes, that’s reversed, with the market now worried about any hawkish hints.”
In Europe, where the region-wide Stoxx 600 closed 0.1% higher, while Germany’s Dax rose 0.5% and France’s CAC 40 climbed 0.2%.
In the UK, the FTSE 100 fell 0.3%, but Rolls-Royce shares jumped nearly 24% after beating earnings forecasts.
Hong Kong’s Hang Seng index fell 0.4%, while China’s CSI 300 lost 0.1%.
Brent crude rose 2.2% to $82.44 a barrel, while WTI, the US equivalent, gained 2.2% to $75.59 a barrel.