By Yasin Ebrahim
Investing.com -- The Dow cut losses to close higher Thursday, led by growth sectors as investors bought the dip in Microsoft following a warning on performance and shrugged off signs that the Federal Reserve isn't mulling a pause on rate hikes later this year.
The Dow Jones Industrial Average gained 1.3%, 433 points, the Nasdaq jumped 2.7%, and the S&P 500 added 1.8%.
Microsoft (NASDAQ:MSFT) slashed its losses despite cutting its outlook for fourth-quarter profit and revenue as a strong dollar is expected to weigh on foreign revenue. Its shares closed nearly 1% higher.
The tech giant now expects earnings in a range of $2.24 and $2.32 per share, down from a prior forecast of $2.28 to $2.35 per share. Revenue for the quarter was lowered to between $51.94 billion and $52.74 billion, down from a prior range of $52.40 billion to $53.20 billion.
Other tech stocks recovered from an early-day slump, led by Meta Platforms (NASDAQ:FB) as investors bought the dip that followed an announcement on Wednesday from the social media company that Sheryl Sandberg was stepping down as chief operating officer later this year.
Chip stocks were underpinned by gains in NVIDIA (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) ahead of the latter's investor day on June 9.
Tech was also supported by a breather in Treasury yields even as the Federal Reserve Vice President Lael Brainard downplayed expectations that the Fed could pause rate hikes in September.
"Right now, it is very hard to see the case for a pause" in September, Brainard said. "We still have a lot to do to bring inflation down to our 2% target."
The remarks came on the heels of the data showing fewer than expected private job gains for May.
Private payrolls grew by 128,000 in May, a decline from the 202,000 in April, according to a report released Thursday by ADP and Moody's Analytics. That was well below economists’ forecast of 300,000.
The private payrolls report, which has at times served as a precursor to the nonfarm payrolls for May, expected to be released on Friday, isn’t a reliable indicator.
“On the face of it, therefore, the report appears to support our below-consensus forecast for tomorrow’s official number, but ADP is not a reliable indicator of the official payroll numbers,” Pantheon Macroeconomics said.
Economists are forecasting that the U.S. economy added about 325,000 jobs in May.
Energy stocks was the only sector to end the day in the red even as oil prices rose more than 1% after OPEC and its allies agreed to increase output in July and August.
Valero Energy (NYSE:VLO) and Diamondback Energy (NASDAQ:FANG) were among the biggest gainers in the energy sector.
In other news, GameStop (NYSE:GME) rose 10% after reporting a wider than expected loss that “was almost entirely driven by higher SG&A expenses as management continued to aggressively hire professionals across blockchain gaming, ecommerce and technology, and operations,” Wedbush said in a note.