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Upbeat Economic Data Leads To Rally On Wall Street - U.S. Commentary


Stocks moved sharply higher over the course of the trading day on Thursday, regaining some ground after moving notably lower over the past few sessions. The markets benefited from a positive reaction to the release of a batch of economic data.

The major averages pulled back off their highs going into the close but still closed firmly in positive territory. The Dow surged up 180.85 points or 1.2 percent to 15,176.08, the Nasdaq jumped 44.93 points or 1.3 percent to 3,445.37 and the S&P 500 soared 23.84 points or 1.5 percent to 1,636.36.

The rally on Wall Street came on the heels of the release of a pair of upbeat economic reports, including a Commerce Department report showing slightly stronger than expected retail sales growth in May.

The report said retail sales increased by 0.6 percent in May after edging up by 0.1 percent in April. The sales growth came in just above economist estimates for a 0.5 percent increase.

Excluding a 1.8 percent jump in sales by motor vehicle and parts dealers, retail sales increased by a more modest 0.3 percent in May. The increase in ex-auto sales matched economist estimates.

Chris Low, chief economist at FTN Financial, said, "Cars are among the most interest rate sensitive areas of the economy. The decent May sales gain suggests the recent backup in rates has not hurt them yet, though the story may change in June."

"For now, however, car sales and retail sales in general are decent, suggesting consumers are recovering from the pain of higher taxes," he added.

Meanwhile, the Labor Department released a report showing an unexpected decrease in first-time claims for unemployment benefits in the week ended June 8th.

The Labor Department said initial jobless claims fell to 334,000, a decrease of 12,000 from the previous week's unrevised figure of 346,000. The modest decrease came as a surprise to economists, who had been expecting initial jobless claims to edge up to 350,000.

A separate report from the Labor Department showed an unexpected drop in import prices in May, while the Commerce Department reported an increase in business inventories in April that matched estimates.

Traders seemed to shrug off concerns that the upbeat economic data could lead the Federal Reserve to scale back its asset purchase program in the near future.

Sector News

Steel stocks showed a substantial upward move over the course of the session, driving the NYSE Arca Steel Index up by 3.8 percent. The gain by the index came after it ended the previous session at its worst closing level in almost four years.

Cliffs Natural Resources (CLF) Gerdau (GGB), and U.S. Steel (X) turned in some of the steel sector's best performances.

Significant strength also emerged among housing stocks, as reflected by the 3.9 percent gain posted by the Philadelphia Housing Sector Index. KB Home (KBH) and Ryland Group (RYL) posted standout gains on the day.

Commercial real estate stocks also moved notably higher after falling sharply in recent weeks. The Morgan Stanley REIT Index jumped 2.6 percent after ending the previous session at a nearly five-month closing low.

Networking, brokerage, semiconductor, and transportation stocks also saw considerable strength amid broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw substantial weakness during trading on Thursday. Japan's Nikkei 225 Index plummeted by 6.4 percent, while Hong Kong's Hang Seng Index tumbled by 2.2 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index ended the day down by 0.6 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index both edged up by 0.1 percent.

In the bond market, treasuries moved back to the upside following some recent weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.6 basis points to 2.174 percent.

Looking Ahead

Trading on Friday could be impacted by another batch of U.S. economic data, including reports on producer prices, industrial production, and consumer sentiment.

by RTTNews Staff Writer

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