Dow Jones, S&P 500 aim to snap three-day losing streak as Nasdaq leads stocks higher

What’s driving markets

U.S. stocks were attempting to revive momentum from November, but some traders worry that one of the best months for stocks in the past decade has left the market overextended.

A fear is that the market may have been too quick to price in as many as five interest-rate cuts from the Federal Reserve in 2024, a shift in expectations that sent stocks surging in the past month and Treasury yields plunging.

But data on job openings and private-sector payrolls released earlier in the week have helped put a floor under stocks to some extent by bolstering expectations that Friday’s jobs report from the Labor Department could come in below expectations, according to Michael Lebowitz, a portfolio manager at RIA Advisors.

In theory, at least, this would make rate cuts next year more likely.

“We saw a relatively weak report for ADP and JOLTS, so it seems the market as a whole is anticipating something lower than expectations,” Lebowitz said in a phone interview with MarketWatch. The median forecast from economists polled by The Wall Street Journal calls for 190,000 new jobs to have been created.

“The way the market interprets that is the Fed is closer to easing and won’t raise rates anymore,” Lebowitz said.

Investors may want to be careful what they wish for. While traders seem to think that rate cuts would help push stocks higher, Lebowitz noted that in most cases, the market’s reaction is exactly the opposite.

Traders received another labor-market update on Thursday with the release of weekly data on jobless claims. The number of Americans who applied for unemployment benefits last week was barely changed at 220,000.

See: Jobless claims inch up to 220,000, layoffs still low

Tech stocks took the lead on Thursday, with shares of Alphabet Inc.
GOOGL,
+6.17%
and Advanced Micro Devices
AMD,
+7.91%
among the biggest gainers on the Nasdaq Composite. Meanwhile, the Dow benefited from a surge in shares of Walgreens Boots Alliance Inc.
WBA,
+8.49%,
but weakness in other constituents, including shares of UnitedHealth Group
UNH,
-0.33%,
helped offset the boost from Walgreens.

Lebowitz noted that stocks have embraced a “Dow or Nasdaq” dynamic this week, with either the Dow or the Nasdaq rising. It’s evidence that mutual funds might be rotating some of their holdings away from this year’s market leaders.

Outside of U.S. stocks, investors were keeping a close eye on global bond yields after the Bank of Japan said it could soon exit its ultraloose monetary policy, sending local bond yields soaring in a move that reverberated across global debt markets.

The Nikkei 225 equity index
JP:NIK
fell 1.8%, the Japanese yen
USDJPY,
-2.75%
jumped 1.3% and 10-year Japanese government bond yields
BX:TMBMKJP-10Y
spiked by 11 basis points.

The move comes after lower inflation alongside signs of a cooling labor market have helped push benchmark 10-year Treasury yields
BX:TMUBMUSD10Y
down from a 16-year high of 5% in October to nearly 4.1% during Wednesday’s session. The chances of the Fed trimming borrowing costs by at least 25 basis points at its March meeting has risen to 58.4% from just 22% a month ago.

In other markets, crude-oil futures
CL.1,
-0.58%
were higher, but with the U.S. benchmark still below $70 a barrel.

Companies reporting earnings on Thursday include Broadcom
AVGO,
+1.72%,
Lululemon
LULU,
+1.13%
and DocuSign
DOCU,
-0.36%
after the close.

Companies in focus

• GameStop Corp.’s stock
  GME,
  +2.97%
  rose after the company’s earnings report late Wednesday.
• Dollar General Corp.’s stock
  DG,
  -0.07%
  fell after the discount retailer beat third-quarter earnings estimates.
• JetBlue Airways Corp. shares
  JBLU,
  +12.37%
  jumped Thursday, after the airline raised guidance for the fourth quarter and full year, saying travel demand remains “healthy.”