Wall Street rallies toward best day since the start of 2023, and Dow jumps more than 600 points

NEW YORK (AP) — U.S. stocks are rallying Thursday after a better-than-expected report on unemployment eased worries about the slowing economy.

The S&P 500 was up by 2.2% in late trading and on track for its best day since the first week of 2023. The Dow Jones Industrial Average was up 664 points, or 1.7%, with a little less than an hour remaining in trading, and the Nasdaq composite was 2.7% higher as Nvidia and other Big Tech stocks helped lead the way.

Treasury yields also climbed in the bond market in a signal investors are feeling less worried about the economy after a report showed fewer U.S. workers applied for unemployment benefits last week. The number was better than economists expected.

It was exactly a week ago that worse-than-expected data on unemployment claims helped enflame worries that the Federal Reserve has kept interest rates at too high of an economy-slowing level for too long in order to beat inflation. That helped send markets reeling, along with a rate hike by the Bank of Japan that sent shockwaves worldwide by scrambling a favorite trade among some hedge funds.

At the worst of it, at least so far, the S&P 500 was down about 9% from its record set last month. Such drops are regular occurrences on Wall Street, and “corrections” of 10% happen roughly every year or two.

What made this drop particularly scary was how quickly it happened. A measure of how much investors are paying to protect themselves from future drops for the S&P 500 briefly surged toward its highest level since the COVID crash of 2020.

Still, the market’s swings look more like a “positioning-driven crash” driven by too many investors piling into similar trades and then exiting them together, rather than the start of a long-term downward market caused by a recession, according to strategists at BNP Paribas.

They say it looks more similar to the “flash crash” of 2010 than the 2008 global financial crisis or the 2020 recession caused by the pandemic.

Of course, markets have been quick to turn over the past week regardless of any long-term predictions.

“Today’s jobless claims data may ease some of the concerns raised by last week’s soft jobs report,” said Chris Larkin, managing director, trading and investing, at E-Trade from Morgan Stanley. “But with inflation data due out next week and the stock market still working through its biggest pullback of the year, it’s unclear how much this will move the sentiment needle.”