Dow rises 120 points and returns from steep 2-day sales
Shares rose on Thursday, recovering some of the losses from a steep two-day sellout amid rising expectations that the Federal Reserve will cut interest rates later this month.
Load Error [19659004] The Dow Jones Industrial Average closed 123 points higher, or 0.48%. The S&P 500 gained 0.47% while the Nasdaq Composite jumped 0.92%.
Technical stocks led the way higher. Facebook rose by 2.4% while other “FANG” shares such as Alphabet and Amazon gained 0.9% and 0.2% respectively. Apple traded 0.8% higher.
Wall Street went into Thursday's session amid a rough start to the fourth quarter. Dow lost more than 800 points in the first two sessions of the quarter after ISM posted its weakest reading in the manufacturing sector in more than 1[ads1]0 years, raising concerns about an economic downturn.
The decline in stocks pushed the S&P 500 below its 50-day and 100-day moving averages, two key technical levels followed by traders. Jeff Kilburg, CEO of KKM Financial, said the broad index remains "true to its 2019 technical behavior," noting that it expects to find support around the 200-day moving average if approaching the level.
The weakness of American industry raised concerns about the impact of the trade war on the US-China economy. The conflict started last year. Since then, China and the United States have dropped billions of dollars of their products. Delegations from Washington and Beijing will meet next week in hopes of reaching agreement.
"Highlights: Increased uncertainty threatens financial confidence after the September stock market run out of steam," said Willie Delwiche, investment strategist at Baird, in a note. "The manufacturing sector continues to weaken, the CEO's confidence is at the lowest level in ten years and the pace of private sector job growth is slowing."
Shares were briefly added to the losses on Thursday after ISM's read on the US service sector fell to its lowest level since August 2016. Dow fell as much as 335.16 points, while the S&P 500 and Nasdaq fell more than 1% each lowest level.
"We are concerned that production declines are bleeding in services, but while numbers were weak this morning, it was still in positive territory," said Janet Johnston, portfolio manager at TrimTabs Asset Management. "In this environment where one day you have good data and the other has weak data, we believe that the best way to play it is with high-quality companies with free cash flow growth, strong balance sheets and other moats."
However, the big indices soon returned Thursday's loss, as the likelihood of a Fed cut this month increased. Expectations for an interest rate cut in October jumped to 93.5% from 77% Wednesday, according to CME Group's FedWatch tool.
The Fed is scheduled to meet at the end of the month. Last month, the central bank cut interest rates for the second time in 2019.
—CNBC's Elliot Smith contributed to this report.
