By Stephen Culp
NEW YORK (Reuters) – U.S. stocks reversed an earlier sell-off to close higher on Thursday, and Treasury yields steadied, as investors digested weak labor market data ahead of a U.S. jobs report, seeking signs the Federal Reserve could pause on rate hikes.
All three major U.S. stock indexes bounced back, turning green by early afternoon, with megacap momentum stocks putting the Nasdaq out front.
Even so, the S&P 500 and Nasdaq finished the holiday-shortened week lower after three weeks of gains.
The blue-chip Dow gained on the week.
Economic data on Thursday suggested the U.S. labor market is feeling the effects of the Fed’s aggressive interest rate hikes designed to cool the economy and curb inflation.
On Friday, a market holiday, the Labor Department is due to release its March employment report, and market participants will have the weekend to digest the data before Monday’s opening bell.
“Markets are a bit oversold, especially if we’re looking at the Fed being close to pausing rate hikes,” said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York. “The market has marched higher, and volume has dried up a bit on the verge of a holiday weekend.”
“A little bit of buying can really goose the market.”
Financial markets have priced in 47% likelihood that the central bank will leave the Fed funds target rate at the 4.75% to 5.00% range at the conclusion of the next monetary policy meeting in May, and a 53% chance of 25-basis-point hike, according to CME’s FedWatch tool.
“It’s kind of a 50/50 from investors whether there will be a rate hike at the next Fed meeting,” said Tom Hanlin, national investment strategist at US Bank Wealth Management in Minneapolis. “Investors are pricing in rate cuts before year-end, but the Fed has said they will keep rates at a high level for as long as it takes.
“That gap is what’s causing volatility in the markets,” Hanlin added.
The Dow Jones Industrial Average rose 2.57 points, or 0.01%, to 33,485.29, the S&P 500 gained 14.64 points, or 0.36%, to 4,105.02 and the Nasdaq Composite added 91.10 points, or 0.76%, to 12,087.96.
European stocks closed higher, led by gains in real estate and travel stocks, along with solid industrial production data from Germany. The pan-European STOXX 600 index rose 0.51% and MSCI’s gauge of stocks across the globe gained 0.15%.
Emerging market stocks lost 0.35%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.44% lower, while Japan’s Nikkei lost 1.22%.
U.S. 10-year Treasury yields inched higher following the jobless claims report, snapping a recent series sharp declines.
Benchmark 10-year notes last fell 5/32 in price to yield 3.305%, up from 3.287% late on Wednesday.
The 30-year bond last rose 5/32 in price to yield 3.5489%, down from 3.557% late on Wednesday.
The greenback seesawed against a basket of world currencies in advance of Friday’s nonfarm payrolls report.
The dollar index rose 0.05%, with the euro up 0.17% to $1.0921.
The Japanese yen weakened 0.38% versus the dollar at 131.83, while Sterling was last trading at $1.2442, down 0.12% on the day.
Crude prices settled higher, and notched a weekly gain following OPEC+ production cuts and a drop in U.S. oil inventories.
U.S. crude edged up 0.11% to settle at $80.70 per barrel, and Brent settled at $85.12 per barrel, up 0.15% on the day.
Gold dipped, extending losses as Wall Street rebounded, but the safe-haven metal posted a weekly gain on growing recession jitters.
Spot gold dropped 0.7% to $2,007.19 an ounce.
(Reporting by Stephen Culp; Additional reporting by Kevin Buckland in Tokyo and Naomi Rovnick in London; editing by Jonathan Oatis, Barbara Lewis and David Gregorio)