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Stocks Move Sharply Higher, Extending Yesterday's Recovery - U.S. Commentary

After moving notably higher in the previous session, stocks saw further upside during trading on Thursday. With the strong upward move, the markets continued to recover from the sell-off that was seen earlier in the week.

The major averages closed firmly in positive territory, near their best levels of the day. The Dow jumped 181.19 points or 1.4 percent to 12,986.58, the Nasdaq surged up 39.09 points or 1.3 percent to 3,055.05 and the S&P 500 soared 18.86 points or 1.4 percent to 1,387.57.

The significant strength that emerged on Wall Street was partly in reaction to a Commerce Department report showing a significantly narrower than expected U.S. trade deficit in the month of February.

The report showed that the trade deficit narrowed to $46.0 billion in February from $52.5 billion in January. Economists had been expected a trade deficit of about $51.7 billion.

The data indicated that trade wasn't as big of a drag on first quarter GDP growth as previously anticipated and led Capital Economics to raise its first quarter GDP growth estimate to 2.5 percent from 2.0 percent.

Meanwhile, traders largely shrugged off the release of a report from the Labor Department showing a notable increase in initial jobless claims in the week ended April 7th.

The Labor Department said initial jobless claims rose to 380,000 from the previous week's revised figure of 367,000. Economists had expected jobless claims to edge up to 359,000 from the 357,000 originally reported for the previous week.

While the increase lifted jobless claims to their highest level since late January, economists noted that the numbers may have been skewed by the holiday weekend.

A separate report from the Labor Department showed that its producer price index was unchanged in March following a 0.4 percent increase in February. Economists had been expecting the index to increase by 0.3 percent.

Excluding food and energy prices, the core producer price index rose by 0.3 percent in March after edging up by 0.2 percent in February. The core index had been expected to increase by 0.2 percent.

The rally on Wall Street was also attributed to renewed optimism about the possibility of further quantitative easing by the Federal Reserve, which came despite last week's discouraging Fed minutes.

In corporate news, shares of Sony (SNE) ended the day modestly lower after the consumer electronics giant said it will cut about 10,000 jobs in fiscal 2012 as part of a turnaround plan.

Sector News

Most of the major sectors showed notable moves to the upside on the day, with resource-related stocks posting particularly strong gains.

Steel stocks turned in some of the market's best performances, driving the NYSE Arca Steel Index up by 4.7 percent. Standout gains by U.S. Steel (X) and AK Steel (AKS) helped to lift the index further off the three-month closing low that it set on Tuesday.

Considerable strength was also visible among gold and oil service stocks, which moved higher along with the prices of their associated commodities. The NYSE Arca Gold Bugs Index and the Philadelphia Oil Service Index advanced by 3.9 percent and 3.5 percent, respectively.

Transportation stocks also saw significant strength on the day, as reflected by the 2.2 percent gain posted by the Dow Jones Transportation Average. JetBlue (JBLU), Kansas City Southern (KSU), and Con-Way (CNW), turned in some of the sector's best performances.

Health insurance, chemical, housing, and financial stocks also posted notable gains, reflecting the broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday, benefiting from the overnight rebound on Wall Street. Japan's Nikkei 225 Index rose by 0.7 percent, while Hong Kong's Hang Seng Index ended the day up by 0.9 percent.

The major European markets also moved to the upside on the day amid some volatility. While the U.K.'s FTSE 100 Index advanced by 1.3 percent, the French CAC 40 Index and the German DAX Index both closed up by 1 percent.

In the bond market, treasuries turned lower over the course of the session after seeing early strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.1 basis points to 2.049 percent after hitting an early low of 2.012 percent.

Looking Ahead

Earnings news is likely to be in focus on Friday, with Google (GOOG) releasing its quarterly results after the close of today's trading and JP Morgan (JPM) and Wells Fargo (WFC) due to report their results before the start of tomorrow's trading.

Economic data may also attract some attention, with the Labor Department due to release its report on consumer price inflation. Reuters and the University of Michigan are also scheduled to release their preliminary report on consumer sentiment in April.

Traders are also likely to keep an eye on remarks by Federal Reserve Chairman Ben Bernanke, who is due to speak at a Russell Sage Foundation/Century Foundation Conference.

by RTTNews Staff Writer

For comments and feedback: editorial@rttnews.com

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