Dow Jones soars nearly 500 points to session high on signs that Fed may be done hiking rates

What’s driving markets

Wall Street stepped up a four-day rally Thursday afternoon, with energy, financials and the rate-sensitive information technology segments of the S&P 500 all up 5% on the week so far, according to FactSet data.

The rally in stocks was intensifying after the Federal Reserve kept interest rates on hold Wednesday. The main focus in markets was on its hints that rising bond yields have been doing some of the central bank’s inflation-fighting job for it.

Although, Jamie Dimon, JP Morgan Chase & Co.’s
JPM,
+1.32%
chief executive, on Thursday warned of the chance of additional rate hikes, saying the mega bank was prepared in the event 10-year Treasury yields
BX:TMUBMUSD10Y
rise to 7% to 8%.

“Obviously, the market is reacting positively,” Peter Cardillo, chief market economist at Spartan Capital Securities, said during a phone interview with MarketWatch.

“The fact that Powell paused for the second [meeting] in a row and basically indicated that rising yields are doing the Fed’s work by saying yields would dampen activity going forward — to me this suggests that he’s finished with the tightening cycle.”

Treasury yields continued to slide, with the 10-year yield down 8 basis points at 4.68%, near its lowest level in more than two weeks, according to FactSet data. Bond yields move inversely to prices.

That also helped lift stocks, with the S&P 500 poised to rise for a fourth day and on pace for its biggest four-day percentage gain in roughly a year, according to Dow Jones Market data.

Stocks added to their gains following a batch of favorable labor-market data released ahead of Friday’s October jobs report. A weekly report on jobless claims showed the number of Americans who applied for unemployment benefits last week increased by 5,000 to a seven-week high of 217,000.

But strategists were more focused on a quarterly U.S. government reading on labor-market productivity, which surpassed economists’ expectations while showing that labor costs have fallen.

A 0.8% decline in unit labor costs marked the first decline since the fourth quarter of last year. Cardillo said signs of cheaper labor helped boost demand for stocks Thursday.

After the bell, investors will receive earnings from Apple
AAPL,
+1.97%
while they wait for Friday’s October jobs report.

They’ll be watching carefully as the “Magnificent Seven” member lays out its latest results and guidance following a batch of earlier reports from other megacap technology companies that weren’t well-received by the markets.

Finally, the Bank of England on Thursday opted to follow the Fed and hold rates steady for a second straight meeting, though the vote was closer than expected: 6-to-3 in favor of keeping rates at 5.25%.

Stocks in focus

• Crocs Inc.’s
  CROX,
  -6.69%
  stock was 7% lower Thursday after its fourth-quarter earnings projections fell short of analyst estimates.

• Starbucks Corp.
  SBUX,
  +10.76%
  shares jumped more than 11% after earnings beat estimates and people continued to spend on pricier coffees.

• PayPal Holding
  PYPL,
  +6.66%
  shares were up 6% after Wall Street heard from its new CEO Alex Chriss as the company delivered quarterly results.

• Shares of Palantir
  PLTR,
  +20.88%
  were nearly 20% higher.

• Tesla Inc.
  TSLA,
  +5.80%
  shares rose, putting them on track for their best day in a month and for a three-day win streak.

• Peloton Interactive Inc.
  PTON,
  +15.70%
  turned higher, jumping 16%, despite the maker of connected exercise equipment delivering a downbeat outlook for the holiday period.

• Eli Lilly & Co.
  LLY,
  +4.30%
  shares rose on Thursday after the drugmaker reported a surprise third-quarter profit and strong sales growth, boosted by diabetes drug Mounjaro.

—Steve Goldstein contributed reporting