Stock market today: Wall Street gains ground following its sell-off as tech, smaller stocks rise up

NEW YORK — U.S. stocks are rising Thursday, a day after their worst losses since 2022 led to a wipeout for financial markets around the world.

The S&P 500 rose 0.4% in afternoon trading after a surprisingly strong report on the U.S. economy raised hopes for stronger profits at smaller stocks and other formerly unloved areas of the market. The Dow Jones Industrial Average was up 341 points, or 0.9%, as of 2:16 p.m. Eastern time and the Nasdaq composite was 0.3% higher.

Many Big Tech stocks also gained ground, a day after profit reports from Tesla and Alphabet underwhelmed and raised concerns that investors’ frenzy around artificial-intelligence technology had sent stock prices too high.

Whether the handful of stocks known as the “Magnificent Seven” are rising or falling makes a huge impact on Wall Street because they’ve grown to be the most valuable U.S. companies by far. That gives their stock movements larger sway on the S&P 500, and the Magnificent Seven have been the main reasons the index has set dozens of all-time highs in 2024.

For much of the year, Big Tech’s strength masked weakness for other stocks underneath the market’s surface, as they struggled with high interest rates meant to get inflation under control. But Thursday’s report on the economy raised hopes that profits will strengthen for all kinds of companies and sparked a widespread rally.

The economy’s growth accelerated to an estimated 2.8% annual rate from April through June, double the rate from the prior quarter. Perhaps just as importantly for Wall Street, the report wasn’t so hot that it fanned worries about upward pressure on inflation.

Because inflation has largely resumed its slowdown following a disappointing start to the year, the widespread expectation among traders has been for the Federal Reserve to begin cutting its main interest rate from the highest level in more than two decades. Following Thursday’s report, traders still see a 100% probability that the Fed will begin doing so in September, according to data from CME Group.

Cuts to rates would release pressure that’s built up on both the economy and financial markets, and investors are thinking it could offer a particularly big boost to smaller stocks and other formerly downtrodden areas of the market.

The Russell 2000 index of smaller stocks jumped 2%, doing better than other market indexes. It’s up about 9% this month, versus a slight loss for the big stocks in the S&P 500.

In the bond market, the yield on the 10-year Treasury slipped to 4.26% from 4.28% late Wednesday. It’s down significantly from its perch above 4.70% reached in April, which gives a strong boost to stock prices.

IBM was one of the biggest reasons for the Dow Jones Industrial Average’s climb, and it rose 5.8% after delivering stronger profit and revenue than expected for the last quarter. It also raised its forecast for how much cash it will generate this year, saying its AI business has been strong.

ServiceNow was another one of the strongest forces pushing upward on the market. The company, whose platform helps businesses connect seemingly disjointed systems, jumped 15.3% after delivering stronger profit and revenue than expected. It also raised its forecast for subscription revenue this year.

Airline stocks flew higher after American Airlines Group and Southwest Airlines both reported profits for the spring that topped analysts’ expectations. Southwest also announced a break from a tradition of 50 years: It will start assigning seats and selling premium seating for customers who want more legroom.

American Airlines climbed 5.1%, and Southwest Airlines rose 6.7%.

On the losing side of Wall Street was Ford Motor, which tumbled 17.6% after reporting profit that fell short of analysts’ expectations. Its second-quarter net income fell as its combustion-engine unit posted a pretax loss because of rising warranty and recall costs.

In stock markets abroad, indexes dropped worldwide following Wall Street’s wipeout on Wednesday. They fell 3.3% in Tokyo, 1.8% in Hong Kong and 1.2% in Paris as worries spread about whether companies globally would meet expectations for profit growth and about potential moves by central banks on interest rates.

Japan’s Nikkei 225 sank to its lowest closing level since April as a strengthening for the Japanese yen’s value against the U.S. dollar continues to hurt shares of the country’s exporters. The yen has been rising on speculation the Bank of Japan will raise interest rates soon, and its next policy meeting ends on July 31.

Chinese stocks fell as investors questioned a central bank decision to cut another key interest rate after several similar moves earlier this week.

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AP Business Writers Yuri Kageyama and Matt Ott contributed.