Tech Giants Propel U.S. Stocks to Biggest Single-Day Rally Since November 2022

On August 8th, U.S. stocks surged, with the Dow Jones Industrial Average rising 683.04 points (1.76%), the Nasdaq increasing by 2.87%, and the S&P 500 gaining 2.3%, marking its largest single-day jump since November 2022.

Major tech stocks saw significant gains, with Nvidia soaring over 6%, Meta climbing more than 4%, and Tesla up by over 3%. Apple, Microsoft, Amazon, and Google all increased by more than 1%. Nvidia's market value increased by $149.1 billion overnight; Amazon's by $31.8 billion; Tesla's by $22.6 billion; Microsoft's by $31.7 billion; Google's by $38 billion; Apple's by $53.1 billion; and Meta's by $52.4 billion. Altogether, the combined market value of these tech giants rose by approximately $378.7 billion.

The impressive gains in the tech sector were accompanied by notable increases in other segments. Semiconductor companies and airlines saw considerable rises: Arm advanced over 10%, ON Semiconductor more than 8%, and Intel nearly 8%. Similarly, major U.S. airlines, such as American Airlines, Delta Airlines, and United Airlines, gained over 6%.

The broader market rally was also buoyed by uplifting data from the U.S. Department of Labor. For the week ending August 3rd, initial jobless claims fell to 233,000, below the projected 240,000 and previous week's 249,000, implying a slight improvement in the U.S. job market. However, continued claims continued to rise, reaching 1.875 million - the highest since November 2021.

This figure denotes the largest weekly drop in initial jobless claims in a year, promoting optimism among investors. Despite this, the climb in continued claims tempered excitement, suggesting some workers were taking longer to secure new employment.

According to Princeton’s Sarmaya Partners’ Wasif Latif, the lower-than-expected initial claims were encouraging, indicating a potential soft landing for the economy. He emphasized, however, that the more impactful data would be next month's unemployment rate.

Following the data release, U.S. Treasury yields and the dollar showed strength. The yield on the 10-year Treasury note briefly surged above 4%, and the dollar index saw gains.

The optimistic market reaction was furthered by robust performances among the "magnificent seven" tech companies, with Apple's shares rising by 0.96%, Microsoft's by 1.55%, Nvidia's by 2.05%, Google's by 2.3%, Amazon's by 1.42%, Meta’s by 2.78%, and Tesla's by 2.02%.

Great Hill Capital's Thomas Hayes noted that the better-than-expected jobless claims data helped ease recession concerns that had risen following the recent non-farm payrolls report. Analysts like BMO's Ian Lyngen and Bannockburn Global Forex's Marc Chandler also expressed cautious optimism, reinforcing the notion of U.S. labor market stability.

Claudia Sahm, the economist behind the "Sahm Rule", clarified that due to shifts in the labor market, her recession indicator might not be as reliable. She pointed out that the rise in the unemployment rate could be more about labor supply increases, such as post-pandemic immigration surges, rather than the actual weakening of the labor market.

Former New York Federal Reserve President William Dudley voiced concerns about the risks of delaying rate cuts, predicting a potential Fed cut by 25 to 50 basis points in September. Despite some forecasts of a possible downturn, most analysts remain hopeful about the U.S. economy’s resilience.

Even as market sentiment fluctuates, Jerome Powell is expected to adopt a cautious approach in the upcoming Fed meeting, potentially strategizing a 25 basis point rate cut, reflecting a prudent response to the current economic indicators.