U.S. stocks rose in a broad-based rally and Treasury yields fell as data allayed fears of a supercharged jobs market that would support a more aggressive policy path. A gauge of the dollar fell.

The S&P 500 notched their biggest one-day gain this month, albeit in thin holiday trading, to claw back all of the losses suffered in the previous two days. The tech-heavy Nasdaq 100 outperformed, with Tesla Inc. climbing more than 8 per cent and tech giants including Apple Inc. Amazon.com Inc. and Microsoft Corp. also among the biggest gainers. Asian technology stocks rose earlier amid signs China is easing a regulatory crackdown.

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Yields on 10-year Treasuries fell six basis points, halting a week-long, 20-basis-point climb that weighed on risk sentiment. The dollar fell against all of its Group-of-10 peers.

Investors took solace in U.S. jobs data that failed to reveal unwanted surprises, while underscoring the resilience of the labour market in the face of the Federal Reserve’s aggressive monetary tightening. Initial unemployment claims rose slightly to 225,000, inline with expectations, in the week ended Dec. 24. Continuing claims rose to 1.7 million in the week ended Dec. 17, the most since early February.

The rally is a ray of light as a dismal year for stocks and bonds draws to a close. Global equities have lost a fifth of their value in 2022, the largest decline since 2008 on an annual basis, with tech bearing the brunt of the selloff. An index of global bonds has slumped 16 per cent amid sticky inflation and rising interest rates.

 “I’m actually not so afraid of tech,” Sylvia Jablonski, CEO and CIO at Defiance ETFs, said on Bloomberg TV. “I do think you’re going to see a recovery later in the year in a lot of these stocks and I think that investors are a little bit too afraid of them right now. They’re going to miss out on a rebound opportunity in the next let’s say 6-9 months.”

Risk sentiment also got a boost earlier after Italy said it didn’t find any new concerning COVID-19 mutations in the recent arrivals from China. Concerns over risks from the spread of COVID sparked a selloff on Wednesday after health officials there found almost half of the passengers on two flights to Milan tested positive. The US and Italy on Wednesday joined an increasing number of nations requiring COVID tests for travelers from China.

More market commentary

Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter:

“Markets enter 2023 at important transition points. One path is paved with continued disinflation, resilient earnings, moderating growth, a balanced labor market, and higher stock and bond prices. The other path is paved with sticky inflation, slowing growth, a continued tight labor market and lower stock and bond prices. Data points at the start of the year will offer important clues as to which path the markets are taking.”

Chris Gaffney, president of world markets at TIAA Bank:

“Going into the new year, I think investors are going to be focusing on the same things we were focusing on this year and that’s where the central banks are going to take interest rates, and are the inflation numbers going to force them to continue to be very aggressive with the rate hikes or will we see the cooling off that is expected and therefore will we see the markets rebound because the Fed takes a less aggressive stance. Another focus going into the New Year is China, China with the reopening.”

Craig Erlam, a senior market analyst at Oanda Europe Ltd.:

“Investors are going into 2023 with a cautious mindset, prepared for more rate hikes, and expecting recessions around the globe. And then there’s China and its u-turn on COVID prevention. It’s been quite the shift from fighting every case to living with the virus and that creates enormous uncertainty for the start of the year.”

Elsewhere in markets, oil extended losses after US data showed a rise in crude stockpiles and concerns mounted that a rapid surge of infections in China would slow demand in one of the world’s top oil importers.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.7 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 2.5 per cent
• The Dow Jones Industrial Average rose 1.1 per cent
• The MSCI World index rose 1.2 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.5 per cent
• The euro rose 0.5 per cent to US$1.0670
• The British pound rose 0.4 per cent to US$1.2067
• The Japanese yen rose 1.1 per cent to 133.02 per dollar

Cryptocurrencies

• Bitcoin rose 0.5 per cent to US$16,594.69
• Ether rose 0.8 per cent to US$1,195.85

Bonds

• The yield on 10-year Treasuries declined six basis points to 3.83 per cent
• Germany’s 10-year yield declined six basis points to 2.44 per cent
• Britain’s 10-year yield was little changed at 3.66 per cent

Commodities

• West Texas Intermediate crude fell 0.5 per cent to US$78.60 a barrel
• Gold futures rose 0.3 per cent to US$1,821.70 an ounce