Nasdaq posts 1.4% gain on renewed AI optimism, S&P 500 and Dow snap 3-day drop ahead of Friday’s jobs report

How stocks traded

• The Dow Jones Industrial Average
  DJIA
  gained 62.95 points, or 0.2%, to end at 36,117.38.

• The S&P 500
  SPX
  advanced 36.25 points, or 0.8%, to finish at 4,585.59

• The Nasdaq Composite
  COMP
  rose by 193.28 points, or 1.4%, ending at 14,339.99.

After rising for five straight weeks, the S&P 500 and the Dow industrials appeared poised to finish this week lower, down 0.2% and 0.4%, respectively. The Nasdaq Composite has risen 0.2% this week, according to FactSet data.

What drove markets

U.S. stocks looked to build on November’s rally on Thursday, with the S&P 500 and the Dow industrials snapping a three-session losing streak.

Tech stocks took the lead on Thursday, with shares of Alphabet Inc.
GOOGL,
-1.42%
and Advanced Micro Devices
AMD,
+0.43%
among the biggest gainers on the Nasdaq Composite. Google shares finished 5.3% higher, a day after the company announced its latest artificial intelligence model Gemini.

The Dow industrials benefited from a surge in shares of Walgreens Boots Alliance Inc.
WBA,
+1.09%,
which popped 7.2%, but weakness in other constituents, including shares of UnitedHealth Group
UNH,
+0.27%,
helped offset the boost from Walgreens.

“Some consumer-related stocks actually started outperforming first before we got the ‘Google News’ today, and that reduced some fears about the health of the consumer,” said Diane Jaffee, senior portfolio manager at TCW Group.

See: Walgreens’ stock soars 8% to lead Dow gainers but is still on track for worst year since 1972

Yet some traders worried 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, according to CME FedWatch Tool. The shift in expectations 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 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, which could make rate cuts next year more likely, said Michael Lebowitz, a portfolio manager at RIA Advisors.

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

The median forecast from economists polled by The Wall Street Journal calls for 190,000 new jobs to have been created in November.

However, Jaffee told MarketWatch that Friday’s nonfarm payroll number might be “buoyed up a little bit” as previously striking auto workers re-entered the labor market. United Auto Workers employees reached a deal with Volvo’s Mack trucks in early-October, ending a month-long strike at the Volvo Group-owned company
VLVLY,
+0.38%.

See: November’s rally just erased two months of Fed tightening, economist says

In other economic data, traders received the weekly data on jobless claims which show the number of Americans who applied for unemployment benefits last week was barely changed at 220,000.

Companies reporting earnings on Thursday include Broadcom
AVGO,
+2.39%,
Lululemon
LULU,
+5.37%
and DocuSign
DOCU,
+4.83%
after the closing bell.

Companies in focus

• GameStop Corp.’s stock
  GME,
  -4.95%
  finished 10.2% higher after the company’s earnings report late Wednesday.

• Dollar General Corp.’s stock
  DG,
  -3.84%
  fell 1.2% after the discount retailer beat third-quarter earnings estimates.

• JetBlue Airways Corp. shares
  JBLU,
  -0.73%
  jumped 15.2% Thursday, after the airline raised guidance for the fourth quarter and full year, saying travel demand remains “healthy.”

Jamie Chisholm contributed