Dow jumps 500 points as comeback rally intensifies, turns positive for the week

U.S. stocks jumped for a second day as fears around a crisis in China’s property market eased somewhat and as the Federal Reserve kept current monetary stimulus in place for just a little bit longer.

The Dow Jones Industrial Average gained 506 points, or 1.5%. The S&P 500 rose 1.3% and the Nasdaq Composite gained 1%.

Thursday morning gains pushed the Dow and S&P into the green for the week. They’re up 0.5% and 0.4%, respectively. The Nasdaq is down 0.1% for the week.

Salesforce led the index with a 5% gain after the cloud company raised its full-year 2022 revenue guidance. Darden Restaurants led the S&P, jumping more than % after reporting strong quarterly earnings.

Stocks linked to a global economic recovery were higher. General Electric shares added nearly 5%. Las Vegas Sands, which has big China exposure, rose 3.5%. Caterpillar added 2.7%. Energy stocks were also higher.

Bank stocks, which are typically viewed as cyclical stocks whose performance is tied to the path of the economy, rose as Treasury yields climbed higher. JPMorgan, Bank of America and Citibank added about 3%. Regional banks, which tend to trade closely along with the 10-year, like Regions and Fifth Third gained more than 3%.

Hong Kong’s Hang Seng index rebounded more than 1% from losses this week with China property developer Evergrande Group rallying more than 17%. On Wednesday, the company eased fears a bit by resolving payment on a local bond.

But global investors are still waiting on whether the company will pay $83 million in interest on a U.S. dollar-denominated bond due Thursday. Government regulators instructed Evergrande to avoid a near-term dollar bond default, Bloomberg News reported, citing a person familiar.

At the same time, Wall Street Journal reported early Thursday that the Chinese government is asking local authorities to prep for a “possible storm” if Evergrande fails. Some of Evergrande’s bondholders did not expect payment Thursday and had not heard from the company, Reuters reported.

Also on Thursday the Labor Department reported that initial jobless claims rose last week as the U.S. labor market continues its recovery from last year’s recession. There were 351,000 claims last week, topping estimates of 320,000. The reading for the week prior came in at 332,000.

Stocks finished higher across the board Wednesday after the Federal Reserve kept benchmark interest rates unchanged, while indicating no immediate intention of removing stimulus policies.

The Dow gained roughly 340 points, or 1%, for its first positive session in five and best day since July 20. The S&P advanced 0.95%, also snapping a four-day losing streak and registering its best day since July 23. The Nasdaq Composite finished the session 1.02% higher, while the Russell 2000 outperformed on the session, rising 1.48%.

“If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” a statement from the Fed following the meeting read. No timeline was given, however.

The central bank implemented a $120 billion per month bond-buying program last year as the pandemic shuttered the economy. As economic conditions improve more members of the Federal Open Market Committee now see the first rate hike happening in 2022.

“The Fed struck a positive tone, acknowledging that the economy is strong enough to stand on its own two feet and the central bank can begin removing the monetary stimulus that they’ve been providing since the beginning of the Covid crisis,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

“Although there may be some additional turbulence this fall, we are constructive on the US economy in general and believe that any dips would be worth buying as the fundamentals are still sound and recession appears to be more than a year away at this point,” he added.

“We believe the S&P 500 has further room to run, but one of the biggest downside risks stems from valuations amid the prospect of higher yields/ERPs, less liquidity and slower growth,” UBS said in a recent note to clients.

Several companies are on deck for quarterly updates Thursday including Nike and Costco Wholesale, who will report once the market closes.