U.S. stocks closed higher on Thursday as they tried to recover from a massive selloff in the previous session after the Federal Reserve held interest rates steady but also said that a rate cut in March is unlikely. Investors also looked forward to a spate of earnings from megacap tech companies. All three major indexes ended in positive territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) climbed 1% or 369.54 points to end at 38,519.84 points, hitting a record high.

The S&P 500 jumped 1.3% or 60.54 points, to finish at 4,906.19 points, ending its two-day losing streak. Utilities, consumer discretionary and consumer staples were the biggest gainers.

The Consumer Staples Select Sector SPDR (XLP) rose 2%, while the Consumer Discretionary Select Sector SPDR (XLY) advanced 1.9%. The Utilities Select Sector SPDR (XLU) also gained 1.9%. Ten of the 11 sectors of the benchmark index ended in positive territory.

The tech-heavy Nasdaq rose 1.3% or 197.63 points to close at 15,361.64 points.

The fear-gauge CBOE Volatility Index (VIX) was down 3.38% to 13.88. A total of 12 billion shares were traded on Thursday, higher than the last 20-session average of 11.6 billion.

Investors Digest Fed Chair’s Comments

Investors were eagerly waiting for the Federal Reserve’s two-day FOMC meeting with optimism earlier this week. However, their hopes were dashed on Wednesday after the Federal Reserve left interest rates unchanged but said that a March rate cut was unlikely.

Investors were hopeful that the Fed could go ahead with its first rate cut in March but Fed Chair Jerome Powell said that inflation was still high and it's too early to go for rate cuts in March. Powell’s comments weighed on investors’ sentiments leading to a massive selloff.

On Thursday, investors tried to recover from the earlier session’s setback as they digested Powell’s comments. The focus was back on earnings season as they looked forward to quarterly reports from some big tech companies.

The Fed’s stance and the earnings season are both going to drive markets this week as investors await a spate of fresh economic data scheduled for release next week.

In quarterly results released on Thursday, pharmaceutical giant Merck & Co., Inc. ((MRK Quick QuoteMRK - Free Report) ) reported an earnings beat.

Merck reported fourth-quarter earnings of $0.03 per share, beating the Zacks Consensus Estimate of a loss of $0.09 per share. Shares of Merck rose 4.6%. Merck has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

However, shares of QUALCOMM Incorporated ((QCOM Quick QuoteQCOM - Free Report) ) fell 5% due to growing concerns over Android sales in China.

Economic Data

The Labor Department reported that jobless claims totaled 224,000 for the week ending Jan 27, increasing 9,000 from the previous week’s revised level of 215,000. The four-week moving average was 207,705, an increase of 5,350 from the previous week’s revised average of 202,500.

Continuing claims came in at 1,898,000, an increase of 70,000 from the previous week’s revised level of 1,828,000. The 4-week moving average was 1,841,250 an increase of 7,500 from the previous week's revised average of 1,833,750.

The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) jumped to 49.1 in January from 47.1 in the month earlier, its highest reading since October.

On the other hand, the S&P manufacturing PMI survey for January’s final reading came in at 50.7 compared to 47.9 in December.

Construction spending in the United States totaled $2,096.0 billion, increasing 0.9% month over month in December and up 13.1% year over year.