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Dow closes up to make it seven in a row, as jobs data boosts rate-cut hopes

Traders work on the floor of the NYSE in New York

By David French

(Reuters) -The Dow Jones Industrial Average closed higher on Thursday, the seventh straight daily advance for the benchmark, as all three major U.S. indexes gained after weekly jobless claims data offered fresh hope for interest-rate cuts.

U.S. Federal Reserve policy has been the main driver of investor sentiment in 2024. Renewed hopes the central bank will cut rates have pushed the Dow to its biggest rally since December. It closed at its highest since April 1.

Other benchmarks also benefited. After a flat day on Wednesday, the S&P 500 resumed its upward trajectory and closed above 5,200 points for the first time since April 9.

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U.S. equity markets have clawed back losses incurred during April on fears the Fed may ultimately raise interest rates, and as tensions in the Middle East threatened to escalate.

"We've almost had a full recovery of that," said Brad Bernstein, managing director at UBS Private Wealth Management.

For the quarter thus far, the Dow is 1.1% lower, the S&P 500 is 0.8% down and the Nasdaq Composite is off 0.2%.

While next week's producer and consumer prices readings are regarded as the next key signpost, other data have buoyed investor rate-cut hopes.

The number of Americans filing new claims for unemployment benefits increased more than expected to a seasonally adjusted 231,000 last week, data showed. Economists polled by Reuters had forecast 215,000 claims.

Last week's data showing slowing job growth in April and job openings falling to a three-year low in March had investors pricing in one or two rate cuts by the Fed this year. Prior to that, traders were pricing in just one rate cut.

Declining U.S. Treasury yields also supported stocks since higher rates offer investors less risk while also making borrowing to fuel growth more expensive. The yield on the 10-year note was at 4.46% on Thursday, down from 4.7% two weeks ago.

"In the last few days, we've had some interesting events which have really helped calm the bond market," said Bernstein, noting factors including the U.S. Treasury and Fed announcing plans to buy Treasuries.

Lower yields are particularly supportive for tech megacap stocks, Apple, Amazon.com and Meta Platforms META.O> rose between 0.6% and 1%.

The S&P 500 gained 26.41 points, or 0.51%, to 5,214.08 points, while the Nasdaq Composite gained 43.51 points, or 0.27%, to 16,346.27. The Dow Jones Industrial Average rose 331.37 points, or 0.85%, to 39,387.76.

Ten of the 11 major S&P sectors rose, led by a 2.3% rise in the real estate index. Data center operator Equinix surged 11.5% after its first-quarter results.

On the flip side, chip designer Arm Holdings dipped 2.3% as its full-year revenue forecast came in below expectations. Bigger rival Nvidia, which is still to report this earnings season, slipped 1.8%.

Roblox slumped 22.1% after the video-gaming platform cut its annual bookings forecast, in a sign that people were dialing back spending amid an uncertain economic outlook and elevated levels of inflation.

Robinhood Markets was 3.1% lower, despite the online brokerage beating estimates for first-quarter profit, thanks to robust crypto trading volumes and rate hikes that boosted its net interest revenue.

Meanwhile, Spirit Airlines jumped 12.9%, having hit a record low earlier this week.

(Reporting by Sruthi Shankar and Shristi Achar A in Bengaluru and David French in New York; Editing by Devika Syamnath, Shinjini Ganguli, Sweta Singh and David Gregorio)