Wall Street enjoyed its best day of trading in nearly two years, recovering most of the losses it suffered during a sell-off sparked by US economic fears earlier this week.

The S&P 500 rose 2.3% to 5,319.32, its biggest single-day jump since November 2022. The Dow Jones industrial average rose 1.8% to 39,446.49. The technology-focused Nasdaq Composite rose 2.9% to 16,660.02.

The rally came just days after the S&P endured its worst day in almost two years amid a global stock market sell-off. Alarm over the strength of the US economy, heightened by an unexpectedly weak jobs report last week – just a day after the Federal Reserve chose to hold interest rates steady – helped drive Monday’s rout.

But new data on jobless claims released on Thursday appeared to reassure investors of the labor market’s stability. Initial claims fell to 233,000 last week, from 250,000 the week beforehand.

“Initial claims remain more consistent with a mild slowdown than a brewing recession for now,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said.

Even after Monday’s sell-off, the S&P had been up more than 9% since the turn of the year. Each of the leading three US indices last scaled record highs in July, capping a months-long boom in the market.

While the American workforce has remained unexpectedly resilient in recent years, adding an average of 215,000 jobs each month over the past year, economic anxiety looms large. In July, 114,000 jobs were added.

Two years ago, when inflation was at its highest levels in a generation, the Fed scrambled to cool the world’s largest economy by raising rates to a two-decade high. Officials hope to guide the US to a so-called “soft landing”, whereby price growth is normalized, and recession avoided.

Now inflation is falling back, Fed officials are preparing to cut rates. Critics have accused them of waiting too long. They are next due to convene in September.