US stocks experienced a significant surge on Thursday following the release of new labor market data that indicated a more positive outlook for the economy. The latest figures suggested that the economy might not be heading towards the feared downward spiral, boosting investor confidence and driving major indexes higher. The S&P 500 and Nasdaq Composite were on track for their best performance of the year.
The Department of Labor reported a decrease in first-time claims for unemployment benefits to 233,000, down from the previous week's revised total of 250,000. Economists had anticipated 240,000 initial claims for the week ending August 3. This data was seen as a positive sign for a healthy labor market.
The upbeat report led to a substantial increase in the Dow by over 700 points during the afternoon session. The S&P 500 rose by 2.3%, while the Nasdaq Composite saw a gain of nearly 3%. Treasury yields also saw an uptick, with the 10-year Treasury rate surpassing 4% after a recent decline following the disappointing July jobs report.
Despite the overall positive trend, the report also revealed an increase in continuing claims, reaching 1.88 million for the week ending July 27. This marked the ninth consecutive week at or above that level. Weekly jobless claims data, known for its volatility, remains close to pre-pandemic levels and is subject to frequent revisions.
The recent job numbers come as Wall Street aims to recover from a market downturn triggered by the weaker-than-expected July jobs report. Concerns were raised as unemployment rose to 4.3% from 4.1%, fueling worries about a potential economic slowdown.
Global markets were rattled earlier in the week amid fears that the US economy might be decelerating faster than anticipated. This led to significant losses across major US indexes, with the Dow dropping by more than 2.6% and the Nasdaq entering correction territory with a 6% decline.
Analysts believe that Thursday's jobless claims data could alleviate some of the apprehensions stemming from the previous week's lackluster jobs report. However, as attention shifts to the upcoming Consumer Price Index inflation report next Wednesday, the impact on market sentiment remains uncertain.
