Dow Jones leads stock rally after sharp decline

U.S. stocks rebounded on Thursday as investors regrouped after a slide led by big technology companies in the previous session, inspired by doubts about AI.

The Dow Jones Industrial Average (DJI) rose more than 1%, or about 400 points, while the S&P 500 (GSPC) gained 0.7%, after posting steep losses at the close on Wednesday. The Nasdaq Composite (IXIC) erased early losses to gain 0.6%, after suffering the worst day for the tech-heavy index since October 2022.

Stocks are hitting a wall as Wall Street begins to wonder when tech companies’ massive investments in AI will start to pay off. Unimpressive results from Alphabet (GOOGL, GOOG) and Tesla (TSLA) earlier this week dented hopes that big tech companies will live up to their sky-high AI-powered valuations.

The fallout from this crisis has had a knock-on effect on global stock markets, sending the European benchmark Stoxx 600 index (^STOXX) down more than 1%. The Nikkei 225 (^N225) fell more than 3% at the close, although a sudden surge in the yen (JPY/USD=X) also sent the Tokyo benchmark index into a technical correction.

At the same time, concerns about the robustness of the U.S. economy are emerging, as below-average results from large companies cast doubt on consumers’ ability to withstand historically high borrowing costs.

Traders are now anticipating deeper cuts from the Federal Reserve, about 30 basis points by September and nearly 70 basis points by 2024, according to money markets. The odds of an earlier-than-expected rate cut in July have also increased. CME FedWatch Data watch.

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A preliminary estimate of gross domestic product (GDP)) The U.S. economy grew at an annualized pace of 2.8% in the second quarter, well above the 2% expected by economists surveyed by Times Of Update.

The update of the personal consumption expenditures price index for July on Friday will give the Federal Reserve another data point to consider regarding the rate cutting timeline.

On the corporate front, shares of Ford (F) fell 16% after the automaker posted a lower-than-expected quarterly profit.