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Upbeat Economic Data Helps Stocks Extend Upward Trend - U.S. Commentary


Stocks moved mostly higher over the course of the trading day on Thursday, adding to the modest gains posted in the previous session. A batch of largely upbeat economic data helped the markets extend their recent upward trend.

While the Nasdaq underperformed its counterparts, the major averages all ended the day in positive territory. The Nasdaq edged up 1.28 points or less than a tenth of a percent to 3,611.28, while the Dow rose 78.20 points or 0.5 percent to 15,548.54 and the S&P 500 climbed 8.46 points or 0.5 percent to 1,689.37.

The Dow and the S&P 500 reached new record intraday highs during the session and ended the day at new record closing highs. The Nasdaq also set a new multi-year highs.

The strength on Wall Street came on the heels of the release of some better than expected economic data, including a report from the Labor Department showing a bigger than expected pullback by initial jobless claims in the week ended July 13th.

The report said initial jobless claim fell to 334,000, a decrease of 24,000 from the previous week's revised figure of 358,000. Economists had been expecting jobless claims to dip to 345,000 from the 360,000 originally reported for the previous week.

While the data reflects some seasonal distortions, the report has added to recent optimism about the outlook for the labor market.

A separate report released by the Philadelphia Federal Reserve showed that its index of regional manufacturing activity unexpectedly jumped to a two-year high in July.

The Philly Fed said its diffusion index of current activity surged up to 19.8 in July from 12.5 in June, with a positive reading indicating an increase in regional manufacturing activity. The increase came as a surprise to economists, who had expected the index to drop to a reading of 9.0.

With the unexpected increase, the Philly Fed index reached its highest level since jumping to 36.1 in March of 2011.

Traders also kept an eye on Fed Chairman Ben Bernanke's second day of testimony on Capitol Hill, with the Fed chief appearing before the Senate Banking Committee.

Bernanke's prepared remarks mirrored those he delivered before the House Financial Services Committee on Wednesday, when he attempted to reassure the markets that the Fed will leave interest rates at low levels well after the central bank halts its asset purchase program.

Positive sentiment was also generated by some upbeat earnings news, with financial giant Morgan Stanley (MS) jumping by 4.4 percent after reporting second quarter earnings and revenues that exceeded expectations.

Sector News

Health insurance stocks showed a substantial move to the upside, driving the Morgan Stanley Healthcare Payor Index up by 3.1 percent. With the gain, the index reached a record closing high.

UnitedHealth (UNH) helped to lead the health insurance sector higher, surging up by 6.5 percent after reporting better than expected second quarter earnings.

Considerable strength was also visible among banking stocks, as reflected by the 1.7 percent gain posted by the KBW Bank Index. Strong gains by PNC Financial (PNC) and Bank of America (BAC) helped lift the index to its best closing level in almost five years.

Natural gas stocks also turned in a strong performance, moving higher along with the price of natural gas. With natural gas for August delivery climbing $0.183 to $3.812 per million BTUs, the NYSE Arca Natural Gas Index advanced by 1.8 percent.

Transportation, oil service, and brokerage stocks also posted notable gains on the day, moving higher along with most of the major sectors.

Meanwhile, some semiconductor stocks came under pressure following disappointing earnings news from Intel (INTC), helping limit the upside for the tech-heavy Nasdaq.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance during trading on Thursday. Japan's Nikkei 225 Index surged up by 1.3 percent, while China's Shanghai Composite Index fell by 1.1 percent.

Meanwhile, the major European markets all showed strong moves to the upside on the day. While the French CAC 40 Index jumped by 1.4 percent, the German DAX Index and the U.K.'s FTSE 100 Index both advanced by 1 percent.

In the bond market, treasuries slid firmly into negative territory on the heels of the largely upbeat economic data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.3 basis points to 2.534 percent.

Looking Ahead

Amid a quiet day on the economic front, earnings news is likely to be in focus during trading on Friday. Tech giants Microsoft (MSFT) and Google (GOOG) may attract attention after releasing their quarterly results after the close of today's trading.

by RTTNews Staff Writer

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