Wall Street Ends Higher After Shaking Off Wobbly Start, S&P 500 Gains 1.2%

Thursday's session on Wall Street opened badly. The S&P 500 was down 0.3% in the early going, extending the pain from a day earlier, when the index had fallen 3.5% in its worst drop in more than four months. By the close, it had turned around and finished up 1.2%, gaining 39.08 points to end at 3,310.11. That was less than half of what it had lost on Wednesday.

The Dow Jones Industrial Average rose 139.16 points, or 0.5%, to 26,659.11. It had been down 229 points at its worst and up as much as 371 points at its best. The Nasdaq composite, heavy with technology stocks, did better than the rest of the market, climbing 180.72 points, or 1.6%, to 11,185.59. Even so, all the major indexes remain on track for weekly losses, including a second straight weekly decline for the S&P 500.

Two pieces of economic data helped steady traders. The government estimated that the economy grew at a record annual rate of 33.1% from July through September, following a collapse in the April-June quarter, when it shrank at an annualized rate of 31.4%. Separately, the number of U.S. workers applying for unemployment benefits eased last week to 751,000, down from 791,000 the week before and better than economists had forecast. That figure remains very high compared with the period before COVID-19.

Technology led the rebound, ahead of quarterly reports from Facebook, Amazon and Google's parent company. All three reported results after the close of regular trading that topped Wall Street's expectations. Willie Delwiche, an investment strategist at Baird, said the leadership had returned to the mega-cap names, in anticipation of good earnings that evening from a whole swath of companies.

Expectations for Big Tech have been high, since these companies have largely cruised through the pandemic and investors have bid up their shares on the belief that work-from-home and other accelerated trends will hold. Microsoft showed the risk on Wednesday: its stock slumped 5% even though it reported stronger profit and revenue than Wall Street expected. Analysts have noted that stocks are not getting their usual boost from earnings beats. Still, the reporting season has been better than feared. According to FactSet, earnings per share for S&P 500 companies are on track to fall about 13% from a year earlier, a milder drop than the nearly 21% decline forecast at the start of October.

Caution lingers. A measure of investor fear in the U.S. stock market touched its highest level since June before receding on Thursday, and oil prices kept falling on worries about demand from a virus-weakened economy. In Europe, stocks first rose but levelled off after the head of the European Central Bank said there is little doubt it will deliver more stimulus in December. They were recovering from a sharp slide Wednesday, when France and Germany announced new business restrictions to slow the virus.

Coronavirus cases are also rising in the United States. Even if the sweeping lockdowns of earlier this year don't return, the worry is that a worsening pandemic could keep customers away and cut into profits. Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said the future still looks cloudy and that the virus will determine consumer behaviour.

Meanwhile, Washington has not delivered more support. Economists and investors have asked for it since the summer, when supplemental benefits for laid-off workers and other stimulus approved earlier in the year expired. House Speaker Nancy Pelosi sent a letter to Treasury Secretary Steven Mnuchin on Thursday listing topics she is still waiting to hear back on, including benefits for laid-off workers and coronavirus testing. The 10-year Treasury yield rose to 0.83% from 0.79% late Wednesday. With cases climbing and stimulus talks stalled, the recovery's next steps look uncertain.