After failing to sustain an early upward move, stocks turned in a relatively lackluster performance over the course of the trading day on Thursday. Notable selling pressure emerged in the final hour of trading, however, resulting in a mixed close for the markets.
The major averages ended the day on opposite sides of the unchanged line, with the Dow climbing 46.17 points or 0.4 percent to 12,460.96, while the Nasdaq fell 13.70 points or 0.5 percent to 2,831.02 and the S&P 500 edged down 0.14 points or less than a tenth of a percent to 1,314.99.
The initial strength on Wall Street was partly due to a positive reaction to news of a surprise interest rate cut by China's central bank.
The move backed up recent optimism about further stimulus from the world's central banks, although it also raised some questions about the strength of the Chinese economy.
The markets also benefited from the release of a report from the Labor Department showing a drop in initial jobless claims in the week ended June 2nd.
However, stocks pulled back well off their highs as Federal Reserve Chairman Ben Bernanke began to testify before the Joint Economic Committee in Washington.
Bernanke said that U.S. economic growth appears poised to continue at a moderate pace and suggested that last week's disappointing jobs report may have reflected temporary factors.
While Bernanke said that Fed "remains prepared to take action" if the economic situation worsens, he made no explicit reference to further easing measures.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "It doesn't appear that the two weaker-than-expected payrolls reports in April and May were bad enough on their own to trigger a third round of quantitative easing at the next FOMC meeting in another couple of weeks."
Meanwhile, traders largely shrugged off news that Fitch cut Spain's credit rating by three notches to BBB with a negative outlook.
Peter Boockvar, managing director at Miller Tabak, said that the ratings downgrade was not a surprise and just reflects Fitch playing catch up to the fiscal realities.
In overseas trading, stock markets across the Asia-Pacific region moved higher for the third straight day on Thursday, benefiting from the overnight rally on Wall Street. Japan's Nikkei 225 advanced by 1.2 percent, while Hong Kong's Hang Seng Index ended the day up by 0.9 percent.
The major European markets also ended the day on the upside but well off their best levels. The U.K.'s FTSE 100 Index jumped 1.2 percent, the German DAX Index rose 0.8 percent, and the French CAC 40 Index climbed 0.4 percent.
In the bond market, treasuries showed a lack of direction for much of the session, ending the day nearly flat. The yield on the benchmark ten-year note, which moves opposite of its price, ended the day up by less than a basis point at 1.654 percent.
While most of the major sectors ended the day showing only modest moves, considerable weakness was visible among gold stocks. The NYSE Arca Gold Bugs Index fell by 3.3 percent after ending the previous session at a nearly two-month closing high.
The weakness among gold stocks came amid a sharp drop by the price of the precious metal, with gold for August delivery tumbling $46.20 to $1,588 an ounce.
Health insurance stocks also saw significant weakness on the day, dragging the Morgan Stanley Healthcare Payor Index down by 5.9 percent. Molina Healthcare (MOH) helped to lead the sector lower, plunging by 31 percent after withdrawing its full year guidance.
Semiconductor, brokerage, and networking stocks also saw notable weakness, while steel stocks saw continued strength. The NYSE Arca Steel Index ended the day up by 1.4 percent, climbing further off Monday's eight-month closing low.
Trading on Friday could be impacted by the release of reports on the U.S. trade balance and wholesale inventories, although any developments overseas are likely to take center stage.
by RTT Staff Writer
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