Dow, S&P 500 close higher to snap four-day losing streak and begin September

The Dow Jones Industrial Average ended the day up 145.99 points, or 0.5%, at 31,656.42. The S&P 500 rallied 0.3% to 3,966.85. The Nasdaq Composite fell 0.3%, to 11,785.13, still coming off of deeper losses earlier in the session.

— Tanaya Macheel

Investors are closely watching August's payrolls report, which will be released on Friday at 8:30 a.m.

This jobs report is particularly important because it's one of the last major economic reports the Federal Reserve will weigh before it raises rates at its upcoming September meeting.

Economists polled by Dow Jones predict 318,000 jobs were added last month and that the unemployment rate held steady at 3.5%. Average hourly wages are expected to gain 0.4% from the prior month, or 5.3% on an annualized basis.

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—Darla Mercado, Patti Domm

Shortly after the Dow Jones Industrial Average moved into positive territory late Thursday, the S&P 500 followed, eking out a slight gain before retreating back to just below the flat line.

"Today's equity rebound off the morning lows is likely the beginning of the market realizing that, with the Fed focused solely on inflation and not on growth, good news is actually good news," said Zachary Hill, head of portfolio strategy at Horizon Investments.

"Today's better than expected economic data was met with higher yields, and initially, equities followed this year's pattern and sold off on that bond price action," he added. "But if growth is going to hold in better than feared by market participants, as we expect it will, that should keep earnings firm and provide some support for equity markets."

— Tanaya Macheel

Investors have underestimated the willingness of central banks to keep tightening, as evidenced by the market sell-off that began Friday, according to UBS.

"We maintain our view that the Fed will raise rates by another 100bps by year-end, with risks for more if inflation does not slow in line with our forecasts, said Mark Haefele, chief investment officer at UBS Global Wealth Management.

"With rates likely to stay higher for longer, our base case is for further volatility, earnings downgrades, and higher-than-expected default rates over the course of next year. In equities, we recommend a selective approach and tilt exposure toward value, quality income, and defensives."

— Tanaya Macheel

The Dow Jones Industrial Average flipped positive in the afternoon, rising by about 40 points, or 0.1%. Earlier in the day it had fallen as much as 290 points.

— Tanaya Macheel

The S&P 500 has been hovering above the 3,900 level throughout the trading session on Thursday and investors are focused on whether or not stocks can hold at this key level for clues on just how bad things could get.

"Many metrics are flashing oversold signals, which combined with meaningful support around 3,900 suggests the bulls 'should' be able to stage a rally here," Jonathan Krinsky, BTIG chief market technician, said Thursday. "Given this set-up, should they fail to hold 3,900, we would have to say the June lows were back in play."

He noted that that isn't BTIG's base case, highlighting that the S&P 500 in August reclaimed 50% of the bear market.

"While September is often a notoriously difficult month, it's typically the back half that struggles after some mid-month strength," he added. "Mid-October is when seasonals switch in favor of the bulls. Regardless of how it plays out we can assume it will be messy."

— Tanaya Macheel

Retail traders rushed to buy Apple shares recently after Federal Reserve Chair Jerome Powell warned of potential economic pain ahead, as the central bank pushes to squash inflation.

In all, retail traders bought more than $340 million in Apple shares over a five-day period.

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—Samantha Subin

The energy sector pulled the S&P 500 lower on Thursday, falling 2.9% by midday. It's still one of the only sectors that's up for the year, with gains of about 40%. Valero was one of the biggest decliners in the broad market index, down 6% midday, along with Marathon Petroleum and Halliburton, which have lost about 5% each. The Energy Select Sector SPDR Fund is down 3%.

Technology stocks took a hit too as the yield on the 10-year Treasury note rose. Okta plummeted 36% midday, while Zscaler and Datadog dropped 9% each. Nvidia was down 10% midday amid news that the government is restricting the sale of some of its chips to China.

The tech sector is down 2% on the day, and about 25% this year.

— Tanaya Macheel

The stock market is still not out of the woods despite the recent comeback, according Bank of America.

"Optimism around a soft landing and 1H23 rate cuts has diminished following Jackson Hole, and there are still no real signs of a new bull market yet," Savita Subramanian, Bank of America's head of U.S. equity and quantitative strategy, said in a note.

Subramanian said the market has yet to see the full impact of the Fed's quantitative tightening. The strategist set her year-end S&P 500 target at 3,600, which would translate into a 9% decline from Wednesday's close of 3,955.

— Yun Li

Shares of home retailer and meme stock Bed Bath & Beyond fell nearly 7% midday, after they ended down 21% in the previous session.

The slide on Thursday came after a handful of analysts said its turnaround plan isn't enough to fix its struggling business. Raymond James downgraded the stock, saying the plan "only kicks the can down the road."

The company on Wednesday announced new financing and plans to close stores and lay off employees. It also said in a filing that day that it will sell an undisclosed amount of shares to raise cash.

— Tanaya Macheel

Treasury yields are stinging stocks as investors await Friday's release of the August employment report.

Yields have been rising quickly over the past week, with the 10-year touching 3.26% in Thursday morning trading, the highest since June 22. The 2-year yield, which most reflects Federal Reserve policy, was at 3.51%, the highest since November, 2007.

Technology, which is particularly sensitive to higher rates, was down 1.7%, the third worst major S&P sector in morning trading. Growth shares were also falling, with the ARK Innovation Fund down 4%. Some tech and growth stocks thrive on cheap money because they are valued on future profits, and they are negatively impacted when the cost of money rises.

Economists expect the employment report, due Friday morning, is likely to show the creation of 318,000 jobs, according to Dow Jones. But that would be down from July's very strong 528,000 payrolls. Market pros expect the jobs number will be a major factor in the Federal Reserve's rate hiking decision, expected Sept. 21.

"Let's face it, the rise in long-term rates has been a leading reason for the recent decline in the stock market [and the drop in rates was an important reason for the stock market rally earlier this summer]," notes Matt Maley at Miller Tabak. He said the employment report can have a "critical impact on those long-term rates...at least when the report is different than consensus expectations."

Strategists expect a weaker-than-expected jobs report could be seen as positive for stocks since the Fed may decide it could raise rates by just a half percent. A much higher than expected payrolls number, on the other hand, could be negative since investors will expect a more aggressive Fed.

—Patti Domm

Shares of cloud companies slid on Thursday, putting the WisdomTree Cloud Computing ETF on track for its worst day since June 16.

The ETF was down 6% around 10:33 a.m. ET. On a week to date basis, the fund is down about 8%, and on pace for its third consecutive weekly loss – a first since June 17.

Okta contributed to the sharp decline in the fund. Shares slumped 31% a day after the cybersecurity software company issued its quarterly results. Though Okta beat Wall Street's estimates on the top and bottom lines, a slate of banks downgraded the company's shares. They cited Okta's difficulty integrating Auth0, which Okta acquired in 2021.

"Recent sales execution issues and ongoing challenges with respect to integrating the Auth0 acquisition from last year leave the company without an effective GTM vehicle, which will take time to recover," Morgan Stanley analysts said in a note Thursday. The firm downgraded Okta to equal-weight from overweight and cut its price target to $93 from $150.

MongoDB shares, which lost 21%, also weighed on the cloud ETF.

-Darla Mercado, Gina Francolla

Jeremy Grantham, famed investor with a history of calling market crashes, said the burst of multiple-asset bubbles he's been warning of has yet to occur despite 2022′s extreme volatility.

"The current superbubble features an unprecedentedly dangerous mix of cross-asset overvaluation (with bonds, housing, and stocks all critically overpriced and now rapidly losing momentum), commodity shock, and Fed hawkishness," Grantham said in a note published Wednesday. "Each cycle is different and unique – but every historical parallel suggests that the worst is yet to come."

Grantham, the co-founder of Grantham Mayo van Otterloo in 1977, is a widely-followed investor and he foresaw the 2008 bear market and the dot-com bubble-bursting of 2000. The 83-year-old investor said superbubbles take multiple stages. After the bubble forms and a setback happens, there will usually be bear market rallies before the market hits the bottom, he said.

— Yun Li

Treasury yields moved quickly higher Thursday morning, with the 10-year yield touching 3.26% , the highest since June 22.

The benchmark 10-year yield was at 3.19% late Wednesday afternoon, and strategists say the move was likely more about Friday's employment report than any developments Thursday. Economists expect 318,000 payrolls were added in August, according to Dow Jones.

National Alliance's Andrew Brenner said the 10-year's biggest move Thursday morning came ahead of the release of economic data at 8:30 a.m. ET. One of those reports was jobless claims, at 232,000, the lowest in two months.

"These were nothing numbers. This move today was not on numbers, or was it on Fed speak. This was just old-fashioned stops breaking a level, and everyone started to sell and there were no buyers," Brenner said. Yields move opposite price.

Brenner said it appears the 30-year bond yield triggered a technical move when it broke 3.33% Thursday morning. The 30-year was at 3.36% just after 9:30 a.m. ET, and the 10-year slipped back to 3.24%.

Market pros have been focused on the release of the August employment report Friday. That report could help the Federal Reserve determine whether to raise interest rates by a half point or three-quarters of a point, as expected by many in the markets.

"There's no one thing you can put your finger on besides that it broke support," he said. "There's no liquidity. This started at about 8:10 to 8:15...Tomorrow's number will be incredible, but not today's."

--Patti Domm

Stocks opened lower on Thursday, adding to losses for the fifth day in a row.

The Dow Jones Industrial Average lost about 100 points to begin the trading session, while the S&P 500 and Nasdaq Composite declined about 0.3% and 6%, respectively. All of the major averages were on track to finish the week down by about 3%.

— Tanaya Macheel

Hormel Foods lowered its earnings outlook for the year on Thursday, citing costs as the driving factor.

"We expect elevated cost inflation to persist, primarily related to operations, logistics and raw material inputs," Hormel CEO Jim Snee said in a statement.

"We view the majority of the escalated cost pressures we are currently absorbing as transient and likely to subside over the coming quarters."

The maker of Spam and Skippy, among others, dropped its EPS guidance to $1.78 to $1.85 from $1.87 to $1.97. It reported third-quarter EPS of 40 cents per share, slightly lower than StreetAccount estimates of 41 cents, but it reported revenue slightly above estimates.

Shares were down over 6% in premarket trading.

— Michelle Fox

The month of September has historically been the worst for the stock market.

The S&P 500, on average, has declined 0.56% in September, going back to World War II, according to CFRA. The index has been negative 56% of the time in September, but that has set up the market for an average 0.9% gain in October. November and December have both been positive for the S&P with average gains of 1.4% and 1.6%, respectively, CFRA found.

The S&P 500, in all months, has gained an average 0.7% since 1944, according to CFRA. The only other negative month besides September has been February, with an average decline of 0.2%.

The index was down 4.2% in August.

The road map many strategists have laid out for 2022 is a typical one for mid-term election years, in which the stock market sells off hard in September and into October, before rebounding in the final quarter of the year. A negative September would fit that forecast.

— Patti Domm

Weekly U.S. jobless claims fell to 232,000 for the week ending Aug. 27, showing a decline of 5,000 from the previous period and the lowest level since June 25, the Labor Department reported Thursday. Economists surveyed by Dow Jones expected 245,000.

Investors are monitoring employment and labor data for clues about the economy's ability to fight rising prices, as they digest comments by Federal Reserve officials over the past week reiterating their commitment to fighting inflation.

"It means the labor market is still relatively strong, despite the fact that it is no longer strengthening," Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said of Thursday's data. "As long as the job market remains strong – and that's a big if – the economy can continue to increase nominal GDP and corporate profits will likewise increase."

The latest numbers come ahead of the big nonfarm payrolls report for August, which is due out Friday and is expected to show job gains for the month.

— Jeff Cox, Tanaya Macheel

The two-year Treasury yield jumped 4 basis points to hit an intraday high of 3.516% Thursday, reaching its highest level since Nov. 15, 2007. The short-term rate, most sensitive to the Federal Reserve's monetary policy, jumped more than 0.5% in August and exceeded the yield on the benchmark 10-year note.

— Yun Li

Shares of Nvidia sank more than 5% in the premarket after the chipmaker warned that the U.S. government's order to stop selling artificial intelligence chips in China could hurt its business.

Nvidia said in a regulatory filing that the U.S. government informed the company on Aug. 26 of a new license requirement for future exports to China, aimed at targeting concerns that its military could utilize the products.

The chipmaker said it expects to lose $400 million in potential sales in China in the current quarter.

The news also impacted shares of other chip stocks in the premarket. Advanced Micro Devices, Micron Technology and Qualcomm fell 3.6%, 2.4% and 1.8%, respectively.

— Samantha Subin

After U.S. Federal Reserve Chairman Jerome Powell reiterated the central bank's commitment to raising interest rates aggressively to contain inflation, analysts fear that the potential impact of the Fed's quantitative tightening efforts is being overlooked by the markets.

Quantitative tightening is a monetary policy tactic used by central banks to reduce liquidity and contract their balance sheets, usually by selling government bonds or allowing them to mature and moving them off the bank's cash balances.

Analysts at London-based CrossBorder Capital have warned that the risk is growing of a "major upcoming policy error" from the Fed's course of action, specifically the "impact of excessive QT on financial stability."

The concern about QT was echoed by Mazars Chief Economist George Lagarias, who urged traders and investors to forget what they heard from Powell in Jackson Hole and instead focus on Fed assets as a single leading indicator.

- Elliot Smith

U.K. factory activity offered a rare upside surprise in August, with the the S&P Global/CIPS manufacturing PMI coming in at 47.3 against a consensus forecast of 46.0.

Despite outpacing expectations, the reading still represents the worst month for British factories since May 2020, as the country battles a historic cost of living crisis.

- Elliot Smith

Euro zone manufacturing activity contracted for a second consecutive month in August, according to a final S&P Global final manufacturing PMI (purchasing managers' index) reading on Thursday.

The PMI slipped to 49.6 in August from 49.8 in July, and came in below an initial flash reading of 49.7. The 50 mark separates growth from contraction.

Like many economies, the euro zone faces a cost-of-living crisis fueled by soaring food and energy bills, which are increasingly forcing consumers to curb spending.

- Elliot Smith

European markets made a negative start to the new trading month, having closed out August lower as traders grapple with fears of higher interest rates and a looming economic downturn.

The pan-European Stoxx 600 fell 1.6% by mid-morning in London, with basic resources plunging 4% to lead losses as all sectors and major bourses traded firmly in the red.

- Elliot Smith

CFRA's Sam Stovall does not expect the S&P 500 will set a new low — even if the index again challenges the June bottom.

"Even though we continue to believe that the market will retest its June low, due to seasonal factors and increasing worry over the potential fallout from an overly zealous FOMC, we don't see it setting a new low," Stovall said in a Wednesday note.

Investors are looking for retracement levels near 3,910 and 3,804, Stovall wrote.

— Sarah Min

Shares of Nutanix soared 22% in extended trading after the cloud computing company exceeded earnings expectations in its second-quarter results, and shared strong revenue guidance.

Nutanix reported a loss of 17 cents per share on revenue of $386 million. Analysts surveyed by Refinitiv were forecasting a loss of 38 cents per share on revenue of $355 million.

— Sarah Min

Stock futures opened little changed Wednesday night. Dow Jones Industrial Average futures rose by 30 points, or 0.1%. S&P 500 and Nasdaq 100 futures climbed 0.06% and 0.03%, respectively.

— Sarah Min