Dow closes almost 200 points higher as investors weigh future interest rate hikes

Stocks gained Thursday after whiplashing throughout the session on comments from Federal Reserve Chair Jerome Powell.

Expectations for a 0.75 percentage point interest rate increase in September ticked up, boosting bond yields and pressuring stocks. Still, Wall Street looked past rate hike expectations to continue a rally from Wednesday.

The Dow Jones Industrial Average jumped 193.24 points, or 0.61%, to close at 31,774.52. The S&P 500 rose 0.66% to 4,006.18 and the Nasdaq Composite advanced 0.60% to 11,862.13.

- Carmen Reinicke

Economists at Nomura just changed their forecast for the Federal Reserve's rate hike, now anticipating a 0.75 percentage point increase instead of a 0.50 percentage point one.

Goldman Sachs and Bank of America have the same estimate for September. It's also what markets have currently priced in - traders see an 86% chance of a 0.75% rate hike in September according to the CME Group's Fed watch tool. That's up from a 77% chance one day ago.

-- Carmen Reinicke

Stocks held onto some gains going into the last hour of trading Thursday after whiplashing earlier in the session. Investors weighed a historic rate hike from the European Central Bank and Federal Reserve Chair Jerome Powell's comments that the central bank would stay the course with its own rate increases to fight inflation.

The Dow is up 56 points, or 0.19%. The S&P 500 and the Nasdaq Composite are up 0.22% and 0.08%, respectively.

- Carmen Reinicke

Investors may want to consider how their portfolios are invested amid volatility that's likely to continue.

"Recession risk is rising and we have been moving more defensive in our portfolios as a result. However, high inflation means that traditional 'risk off' strategies such as cash and government bonds can create a drag on total return," Lauren Goodwin, economist and portfolio strategist at New York Life Investments, said in a note to clients.

"We are fully invested in our portfolios, using selective bets within that overall neutral-risk position to build resilience against volatility and inflation. In our equity sleeve, this includes a strong overweight to value equity and dividend payers," Goodwin added.

- Carmen Reinicke, Jesse Pound

The ETF industry has given investors a new way for investors who see a "crypto winter" to bet against the digital asset space.

The Defiance Daily Short Digitizing the Economy ETF launched Thursday and is designed to work as a short on the popular Amplify Transformational Data Sharing ETF.

The Amplify fund focuses on companies with exposure to blockchain technology. Its top holdings, as of July 31, included Nvidia, Overstock.com and Silvergate Capital. The fund has fallen more than 50% over the past year.

Defiance CEO Sylvia Jablonski said that while the new ETF does work as a bet against the crypto industry, it could also be useful to crypto bulls who want some downside protection.

"We're bullish like everybody else on innovation, technology and growth in the space, but that can take a really long time. And if you want to sort of smooth out your ride and hedge some of the downside exposure, it's a great hedging tool," Jablonski said.

The Defiance fund has a management fee of 0.95%, though other costs associated with borrowing and shorting could drive up total expenses, Jablonski said.

— Jesse Pound

Check out some of Thursday's biggest market movers:

• GameStop – Shares of video game retailer rose 4% after the company disclosed a new partnership with cryptocurrency exchange FTX in its quarterly update.
• Rivian Automotive - Rivian shares popped more than 6% after the electric-vehicle startup and Mercedes announced they were planning a joint venture to build electric commercial vans for both brands in Europe.
• Snap — Shares of the social media company jumped more than 8% after the Verge reported that CEO Evan Spiegel broke down a turnaround plan in an internal memo

Read the full story here.

— Samantha Subin

After rallying and giving up all gains to trade lower, stocks have now trimmed losses and are trading roughly flat.

The Dow Jones Industrial average is up about one point, while the S&P 500 is up 0.01%. The Nasdaq Composite is down 0.21% at 12:50 p.m. ET.

- Carmen Reinicke

Stocks gave up earlier gains and tumbled to session lows midday. The Dow Jones Industrial Average shed 141 points, or 0.45%. Earlier in the day, it was up as much as 200 points. The S&P 500 lost 0.30% and the Nasdaq Composite fell 0.51%, also reversing solid gains.

At it's high of the day, the S&P 500 traded at 4,010.50, which put it within striking distance of reaching its 50-day moving average, a level closely watched by traders.

The moves come as investors weigh comments from Federal Reserve Chair Jerome Powell about the central bank's path of rate hikes going forward. While most are pricing in a 0.75 percentage point hike in September, traders are still trying to gauge how long rate hikes will be so large and how high the Fed will ultimately go.

- Carmen Reinicke

Ark Invest's Cathie Wood doubled down on her call for deflation, predicting a big policy reversal from the Federal Reserve in three months at the earliest.

"I would not be surprised to see a significant policy pivot in the next three to six months," Wood said in a tweet Wednesday evening. "The Fed seems to responding to COVID-related supply shocks spanning 15 months the same way that Volcker battled inflation that had been brewing and building for 15 years....Powell is using Volcker's sledgehammer and, I believe, making a mistake."

The innovation-focused investor said the central bank is now basing monetary policy decisions on lagging indicators: employment and core inflation. She said a number of leading indicators are signaling inflation may have already peaked.

— Yun Li

Health care was the best-performing S&P 500 sector Thursday, as the market tried to build on the previous session's sharp gains.

The sector traded 1.3% higher, led by gains in shares of Regeneron, which were up 18% and on pace for their best day since Nov. 9, 2016. The pharmaceutical stock got a boost from positive trial results for a potential retinal treatment.

The iShares Biotechnology ETF also traded nearly 3% higher on the day.

—Fred Imbert

Bank stocks performed solidly Thursday, leading the Dow and the S&P 500 higher. JPMorgan, up 1.73%, was the top performing stock on the Dow. Goldman Sachs is also up nearly 1%.

Bank of America, up 2.29%, lifted the S&P 500. Citizens Financial Group was up 2.8%, KeyCorp gained 2.25% and Wells Fargo rose 2.30%.

-Carmen Reinicke

Shares of Regeneron jumped more than 13% Thursday after the company announced that its eye drug, Eylea, performed well in two pivotal trials testing the medication for use for patients with diabetic macular edema and wet age-related macular degeneration.

The stock is on pace for its best daily performance since Nov. 2016. In addition, Regeneron's jump is lifting the iShares BioTech ETF up 1.8%. The ETF is up 3% week to date and on pace to have its first positive week in four.

—Carmen Reinicke, Gina Francolla

The major averages are still comfortably off their lows of the summer and are on track to snap a three-week losing streak. However, the downtrend has a lot of strength and investors shouldn't get too ahead of themselves, said Fairlead Strategies' Katie Stockton.

The charts analyst highlighted 3,815 as a key level to watch for the S&P 500, on CNBC's "Squawk Box" Thursday. If the index falls below that, investors could suffer another big drop, she said.

"What we're doing in our work is just trusting the downtrend and respecting the negative long-term momentum," she said. "Of course now also the market has negative short term momentum, and we don't want to fight against that."

Read the full story on CNBC Pro.

— Tanaya Macheel

Federal Reserve Chairman Jerome Powell on Thursday reaffirmed his commitment to combating inflation by aggressive tightening.

"History cautions strongly against prematurely loosening policy. I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done," Powell said at a question-and-answer session at the Cato Institute, a Washington, D.C.-based think tank.

His remarks come with markets widely expecting the Fed to make a third consecutive 0.75 percentage point interest rate increase when it meets again Sept. 20-21.

— Yun Li, Jeff Cox

U.S. stocks continued to slide Thursday morning, with the Dow dropping more than 200 points at the market open as investors digest future rate hikes.

The Dow Jones Industrial Average dropped 227 points, or 0.70%. The S&P 500 shed 0.68% and the Nasdaq Composite fell 0.81%. At the same time, bond yields ticked up, adding pressure to stocks.

- Carmen Reinicke

Jobless claims continue to tick down, showing signs of labor market strength amid recession fears.

Initial jobless claims for the week ending Sept. 3 were 222,000, down about 6,000 from the previous week's revised level according to the Labor Department. This marked the lowest number of initial claims since the week ending May 27.

Continuing claims also declined, coming in at 1,414,849 for the week ending Aug. 20.

- Carmen Reinicke

The European Central Bank on Thursday raised its benchmark interest rate by 0.75 percentage point, joining other central banks in handing out aggressive rate hikes to address high inflation.

It's one of the largest increases for the central bank. The move lifted the ECB's deposit rate to 0.75% from 0%.

The rate hike was largely anticipated by economists.

- Carmen Reinicke, Jenni Reid

"The sentiment set up for yesterday's stock market rally was very helpful," said Peter Boockvar, chief investment officer at Bleakley Financial Group in a Thursday note.

The market was oversold and saw a big drop in the number of bulls, per the group's investor intelligence survey, Boockvar said. The number hit its lowest value since June, the recent market trough.

"Outside of these sharp market rallies, it's still a bear market with the S&P 500 trading at a still rich 17.5x," Boockvar said. "I don't see how this multiple doesn't compress to 15 or less inevitably."

- Carmen Reinicke

First Solar rose more than 4% in the premarket after Goldman Sachs double-upgraded the solar stock to buy from sell.

"On the demand front, we see FSLR as one of the best levered to US demand tailwinds within our solar panel supplier coverage as the US accounts for roughly 80% of the company's revenue," analyst Brian Lee wrote.

CNBC Pro subscribers can read the full story here.

— Fred Imbert

European markets opened higher as investors await the ECB's decision on its latest monetary policy moves.

The ECB expected to frontload a series of rate hikes in order to combat inflation, with analysts saying a "jumbo" rate hike of 75 basis points is a possibility.

The pan-European Stoxx 600 was up 0.11% in the first hour of trading. Insurance, banks and basic resources made the biggest gains, as retail firms fell 5.28%.

— Jenni Reid

Apple suppliers in Asia rose after the company announced new products including the iPhone 14, new AirPods and Apple Watches.

In Taiwan, Hon Hai Precision Industry rose 0.94% while Catcher Technology also rose 0.3%.

Panasonic Holdings in Japan traded 3.25% higher, TDK Corporation was up 1.31% Nidec rose 2.76% and Murata Manufacturing Company was 1.74% higher.

–Jihye Lee

The U.S. dollar has room to inch up even higher thanks to rate differentials on the back of a hawkish Federal Reserve, according to Wells Fargo Securities FX strategist Brendan McKenna.

"We think a lot of these international banks will not be able to raise rates as aggressively as the markets are priced in for," he told CNBC's "Squawk Box Asia."

"So it's kind of a combination of a more hawkish Fed and a less hawkish tightening cycle from these international central banks that support the dollar over the remainder of this year," he said.

–Jihye Lee

Shares of electric vehicle makers have largely sold off this year.

Nevertheless, one analyst is still optimistic about the planned energy transition — and that includes EVs — calling it one of the "greatest" investment opportunities since the internet revolution.

Here's what George Gianarikas, senior analyst at Canaccord Genuity, says about buying EV market leader Tesla and younger upstart Rivian.

— Weizhen Tan

Goldman Sachs revised its forecasts for upcoming Federal Reserve rate decisions year.

Analysts led by chief economist Jan Hatzius said in a note that the firm expects a 75-basis-point hike in September, up from a previous forecast of 50 basis points, as well as a 50-basis-point hike in November, also revised from a previous projection of 25 basis points.

It also expects a 25 basis point hike in December — citing officials' recent hawkish commentary.

The note said Fed officials "have seemed to imply that progress toward taming inflation has not been as uniform or as rapid as they would like," the note said.

–Jihye Lee

Market volatility is here to stay, according to market veteran Phil Blancato.

But the president and CEO of Ladenburg Thalmann Asset Management sees a "strong rally" on the cards as market conditions improve.

He predicts when the rally will be, and names his top picks to trade the volatility.

Pro subscribers can read more here.

— Zavier Ong

Shares of GameStop rose 11% in extended trading after the company announced partnership with crypto exchange FTX.

GameStop, which rose to prominence as a meme stock in 2021 but is down 35% this year, launched an NFT business earlier this year. The company will now be carrying FTX gift cards in its store as part of the partnership. FTX and its billionaire founder Sam Bankman-Fried have made moves to backstop struggling crypto companies this year, but the release announcing the GameStop partnership did non mention any financial support.

GameStop also reported its second-quarter results, showing continued struggles in its retail business. The company saw losses and inventory increase while revenue and cash decreased.

— Jesse Pound, Melissa Repko

The stock market enjoyed its best day since Aug. 10 on Wednesday, with widespread gains except for the energy sector.

• The Dow gained 1.4% and is now up 0.8% for the week
• The S&P 500 climbed 1.8% and is now up 1.4% for the week
• The Nasdaq Composite rose 2.1% and is now up 1.4% for the week
• The Russell 2000 small caps gained 2.2% and is now up 1.2% for the week.

— Jesse Pound, Christopher Hayes