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Wall St closes higher, growth stocks lead in thin trading

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Dec 29 (Reuters) –

Wall Street’s main indexes ended higher on Thursday, led by growth stocks in light trading, as U.S. unemployment data signaled the Federal Reserve’s interest rate hikes might be starting to dent labor market strength in its bid to fight inflation.

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All 11 S&P 500 sector indexes rose, with communication service and technology as the biggest winners.

“It’s just relief,” said Keith Buchanan, portfolio manager at GLOBALT Investments in Atlanta. “Selling pressure has been overwhelming the market recently and we could be having a break. That allowed room for stocks to move, and with lower volume (that) can materialize into a pretty good day.”

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Shares of Apple Inc, Alphabet Inc, Microsoft Corp and Amazon.com Inc rose following declines in the past few sessions.

The U.S. Labor Department reported an increase in the number of Americans filing new claims for unemployment benefits last week. But the data indicates a tight U.S. job market even as the Fed works to cool demand for labor in its bid to lower inflation.

The yield on 10-year Treasury notes fell 2.2 basis points to 3.864% on the news.

The Fed’s aggressive interest rate hikes have hammered equities this year, with the benchmark S&P 500 shedding 19.3% and the tech-heavy Nasdaq tumbling nearly 33%.

The technology, consumer discretionary and communication services sectors – which house several rate-sensitive high growth shares – are down between 29% and 40% this year, making them the worst performers among S&P 500 sector indexes.

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Energy shares have bucked the trend with stellar annual gains of 57%.

Wall Street’s main indexes dropped more than 1% on Wednesday, with the Nasdaq hitting a 2022 closing low as rising COVID cases in China and geopolitical tensions added to fears of a likely recession in 2023.

However, investor preference for high-dividend yielding stocks with steady earnings has limited losses in the Dow Jones Industrial Average, which is down just 8.5% for the year.

According to preliminary data, the S&P 500 gained 65.47 points, or 1.73%, to end at 3,848.69 points, while the Nasdaq Composite gained 262.43 points, or 2.57%, to 10,474.72. The Dow Jones Industrial Average rose 341.64 points, or 1.04%, to 33,217.35.

Tesla Inc shares rose after Chief Executive Elon Musk told staff they should not be “bothered by stock market craziness.” The stock remains down 66% for the year. (Reporting by Echo Wang in New York; Additional reporting by Ankika Biswas and Amruta Khandekar in Bengaluru; Editing by Arun Koyyur, Anil D’Silva and Richard Chang)

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