Dow Jones gains 300 points, Smallcaps rally ahead of tariff verdict, jobs report

Benchmark indices on Wall Street remained largely on the edge ahead of important announcements that are scheduled for Friday, before and during the trading session.

The Dow Jones ended 270 points higher, recovering more than half of Wednesday's sell-off. The S&P 500 barely budged from its previous close, while the Nasdaq was dragged 0.5% lower by shares of Nvidia and Apple. The Smallcap Russell 2000 continued its outperforming start to the year, rising another 1.1%.

Defence stocks gained on Thursday in hopes of a bigger budget allocation for fiscal 2027. However, the gains were a lot more moderate in regular trading, ranging between 1% to 4%, compared to a surge up to 7% seen in extended trading on Wednesday.

The US trade deficit narrowed to the lowest since October 2009 owing to a sharp drop in imports, particularly in Pharmaceuticals. Experts believe companies front-loaded the imports to ahead of the October 1 Pharma tariff deadline. Jobless claims for the week were also lower than expected.

The most important event later today will be the potential US Supreme Court judgment on the legality of Trump tariffs.

Prediction markets suggest only a 28% likelihood of the apex court ruling in favour of the tariff implementation in its current form. Treasury Secretary Scott Bessent expects a "mishmash" ruling but stated that the administration will still have the ability to continue collecting tariffs even if the case is lost. However, reimbursements could put a strain on the government's aim to bring down fiscal deficit.

The other major data point today will be the non-farm payrolls update for the month of December. A Dow Jones poll expects the figure to be at 73,000, with the unemployment rate declining back to 4.5% from 4.6% last month. This report also holds significance as it is the first on-time release after the longest US government shutdown in history.

Beyond equities, the US Dollar index strengthened further towards the 99 mark, while Gold and Silver continued to sell-off due to the ongoing rebalancing exercise. Oil prices rose after Donald Trump's warning to Iran with regards to the ongoing protests in the country and inflows due to the index rebalancing.