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Stocks on Wall Street jumped on Thursday, posting their biggest daily gain since November 2022, as a decline in U.S. jobless claims helped allay fears of a looming economic slowdown.

The benchmark S&P 500 rose 2.3 percent, ending its best day in nearly 21 months, while the tech-heavy Nasdaq Composite rose 2.9 percent – its biggest one-day gain since February. The rally has helped to offset some of the losses caused by a sharp sell-off that began a week ago.

The sharp gains came after data on Thursday showed that U.S. jobless claims – seen as an indicator of job losses – fell to the lowest level in a month. That calmed investors after weaker-than-expected employment figures last Friday led to heavy selling in equity markets that spilled over into the start of the week.

“It was last week’s jobs report that sent markets into a tailspin,” said Kristina Hooper, chief global development strategist at Invesco. Therefore, “it was logical that it was a point on the jobs market that calmed markets” this week.

According to figures from the US Department of Labor on Thursday morning, initial jobless claims in the week ended August 3 were 233,000, adjusted for seasonal factors. That was less than the previous week’s upwardly revised figure of 250,000 and below economists’ forecasts of 240,000.

In contrast, last week’s employment report showed that the world’s largest economy added just 114,000 jobs in July, far below the consensus forecast of 175,000. That sent stocks sharply lower in volatile trading on Friday and Monday and sparked a sharp rise in Treasuries as investors increased bets that the Federal Reserve would soon have to cut interest rates.

The Vix index, which indicates the expected turbulence on the US stock market and is considered Wall Street’s “fear barometer”, briefly exceeded the 60 mark on Monday and was thus well above its long-term average of around 20. It then fell again.

This volatility index was around 24 on Thursday, but despite the day’s gains, the S&P was still about 2.3 percent below its closing price the previous week before the jobs report triggered the sell-off.

Nevertheless, for Tim Murray, multi-asset strategist at T Rowe Price, the unemployment report was “a big positive surprise after we had previously experienced a series of negative surprises.”

Hooper of Invesco pointed to an “ongoing healing process – but with the caveat that markets will be nervous because nothing has changed at the Fed. They will not make any rate cuts before the September meeting.”

“I think it will take some time for the markets to normalize, but we have to ask ourselves what triggered this sell-off, and I think it was irrational,” she added. “I don’t think it tells us we’re in for a major recession.”

Until recently, stock markets had performed particularly strongly, driven by hopes of a “soft landing” in which the Fed would succeed in reducing inflation without triggering a recession, and by enthusiasm for companies that rely on artificial intelligence.

Murray noted that chipmaker Nvidia’s second-quarter results will be released later this month. Those numbers “always include insights into the broader AI infrastructure complex,” he noted. “That could be something that really boosts the market.”

“But even then, I would be surprised if that happened. It’s more likely that we’ll get back into a slow uptrend. And if there are some negative data points along the way, it could easily go back down very quickly.”