By Stephen Culp

NEW YORK, Dec 21 (Reuters) – U.S. stocks closed higher on Thursday, winning back much of the previous day’s losses, as economic data fueled optimism that the Federal Reserve would ease monetary policy and revived investor risk appetite.

All three major U.S. stock posted gains as chips surged, led by Micron Technology MU.O after its better-than-expected quarterly forecast, putting the tech-heavy Nasdaq .IXIC out front.

The rally gained momentum as the session drew to a close.

Data on Thursday showed third-quarter U.S. economic growth was not as robust as originally stated, and cracks are appearing in the tight labor market, which the Fed considers an obstacle to cooling inflation.

“The fact that the third-quarter GDP number wasn’t revised upward, and in fact was cut, is giving investors comfort that the path the Fed is on, which they enunciated last week, isn’t going change any time soon,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

U.S. stocks abruptly sank late Wednesday afternoon, snapping a multi-session rally, in a sell-off possibly accelerated by hedging activity associated with short-dated option trades.

“The investor narrative yesterday was about profit taking on the heels of a very long consistent holiday rally,” said Greg Bassuk, chief executive officer at AXS Investments in New York.

“Investors would be prudent to buy on these dips,” Bassuk said, adding that he believes stocks “will end the year strongly.”

Financial markets are pricing in a 71.3% likelihood that the U.S. central bank will reduce the Fed funds target rate by 25 basis points as soon as March, according to CME’s FedWatch tool.

The market is awaiting the Commerce Department’s personal consumption expenditures (PCE) report due on Friday, which will cover income growth, consumer spending and inflation.

Unofficially, the Dow Jones Industrial Average .DJI rose 322.16 points, or 0.87%, to 37,404.16, the S&P 500 .SPX gained 48.37 points, or 1.03%, to 4,746.72 and the Nasdaq Composite .IXIC added 185.92 points, or 1.26%, to 14,963.87.

Micron Technology MU.Oforecast quarterly revenue above market estimates, and its shares jumped on signs of a memory chip recovery in 2024 after one of the most significant downturns in years.

The Philadelphia SE semiconductor index .SOX housing chip stocks handily outperformed the broader market.

Shares of U.S. electric vehicle makers Tesla TSLA.O, Lucid Group LCID.O and Rivian Automotive RIVN.O jumped after a report said the United States was considering tariff hikes on Chinese EV manufacturers.

Triumph Group TGI.N soared after the aerospace supplier said it would sell its components aftermarket business to AAR Corp AIR.N for $725 million.

U.S.-listed shares of Blackberry BB.Ntumbled after the company’s fourth-quarter revenue estimates landed below expectations.

Jobless claims https://tmsnrt.rs/3GT60FK

(Reporting by Stephen Culp; Additional reporting by Johann M Cherian and Shristi Achar A in Bengaluru; Editing by Richard Chang)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Original: TSLA Feed: US STOCKS-Wall St ends sharply higher, rebounding with a boost from chips