Dow Jones rises 370 points to record close as stocks bounce back ahead of Big Tech earnings

Both factors are likely to continue driving sentiment for the rest of the week, along with economic data on the labor market, said market analysts.

Investors expressed disappointment after Powell said on Wednesday that a rate cut in March was “not the most likely case or the base case,” but traders in the federal-funds-futures market still foresaw as many as six quarter-point rate cuts by December, according to the CME FedWatch Tool.

“The market is front-running the Fed,” said Dave Daglio, chief investment officer of TwinFocus. “While the Fed’s comments appear hawkish, the market’s reaction longer-term is dovish,” Daglio told MarketWatch via phone, adding that the market saw Powell’s comments further increasing the probability of rate cuts, although policymakers are unlikely to start easing monetary policy at their March meeting.

See: New York Community Bancorp triggers steepest regional-bank stock swoon since Silicon Valley Bank collapse

Traders also kept a wary eye on the regional-banking sector after shares in New York Community Bancorp
NYCB,
+0.71%
extended their plunge, down 11.1% on Thursday, as the lender highlighted difficulties in commercial real estate. The SPDR S&P Regional Banking exchange-traded fund
KRE
finished 3.1% lower, bringing its year-to-date decline to 8.1%, according to FactSet data.

Richard Farr, chief market strategist at Merion Capital Group, said these incidents could be a sign that issues with regional banks are re-emerging after the Fed announced the end of the bank term funding program that it put in place following the collapse of Silicon Valley Bank and two other U.S. lenders last spring.

“For basically a year, the Fed has been masking problems at the banks. Meanwhile, deposits at small commercial banks are still down, so it brings about the question of how healthy is the banking system, particularly smaller banks,” Farr said during an interview with MarketWatch.

Investors will also digest earnings from three more of the Big Tech stocks that have driven most of the S&P 500’s advance over the past year. Apple
AAPL,
-0.93%,
Meta
META,
+0.41%
and Amazon.com
AMZN,
-1.12%
will announce their results after Thursday’s close.

Apple earnings: Don’t focus on iPhone sales. Instead, watch this metric.

Jobless-claims data showed the number of Americans who applied for first-time unemployment at the end of January rose to a nearly three-month high of 224,000, possibly a sign of some softening in what’s been an incredibly strong labor market.

The final reading of the S&P manufacturing PMI survey for January came in at 50.7, up from 47.9 in December and higher than previously estimated. It marked the strongest improvement in the sector’s performance since September 2022.

Meanwhile, a closely watched index that measures U.S. manufacturing activity rose to 49.1% in January from 47.1% in the prior month, according to the Institute for Supply Management on Thursday. That is the highest level since October.

See: Jobs report forecast to show 185,000 workers hired. But beware the January effect.

On Friday, investors will receive the Labor Department’s nonfarm-payrolls report for January, seen as a marquee economic report.

Companies in focus

• Peloton Interactive Inc. shares
  PTON,
  +6.26%
  finished 24.3% lower on Thursday after the company’s outlook implied more challenges ahead for the one-time pandemic darling.
• Honeywell International Inc. shares
  HON,
  +1.10%
  were off 2.5% despite the company reporting earnings in line with Wall Street’s expectations.
• Merck & Co.
  MRK,
  -0.31%
   saw its shares climb 4.6% after reporting strong earnings, powered by growth in its cancer and vaccine products.
• Plug Power Inc. shares
  PLUG,
  +5.66%
  jumped 5.6% Thursday after the company said it reached a milestone at its recently opened plant.

Jamie Chisholm contributed.