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Stocks Reach New Record Highs Ahead Of Jobs Report - U.S. Commentary

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After initially seeing modest strength, stocks saw further upside over the course of the trading session on Thursday. With the gains, the major averages extended a recent upward trend, once again reaching new record closing highs.

The major averages finished the session firmly in positive territory. The Dow rose 113.75 points or 0.5 percent to 22,775.39, the Nasdaq advanced 50.73 points or 0.8 percent to 6,585.36 and the S&P 500 climbed 14.33 points or 0.6 percent to 2,552.07.

The continued strength on Wall Street reflected recent upward momentum, with the S&P 500 closing higher for the eighth consecutive session.

Stocks have recently benefited from a batch of largely upbeat U.S. economic data as well as optimism about the outlook for tax reform.

Positive sentiment was generated by news the House approved a $4.1 trillion budget resolution, taking a key step in efforts to pass their tax reform plan.

The budget resolution includes major spending cuts but is largely seen as a vehicle for Republicans to enact their proposed tax cuts.

The bill unlocks the reconciliation process, allowing Republicans to pass tax reform with a simple 51-vote majority in the Senate.

Trading activity was somewhat subdued, however, with the closely watched monthly jobs report due on Friday keeping some traders on the sidelines.

Employment is expected to rise by 90,000 jobs in September after climbing by 156,000 jobs in August. The unemployment rate is expected to hold at 4.4 percent.

The Labor Department released a report this morning showing first-time claims for unemployment benefits fell by more than expected in the week ended September 30th.

The report said initial jobless claims dropped to 260,000, a decrease of 12,000 from the previous week's unrevised level of 272,000. Economists had expected jobless claims to edge down to 265,000.

A separate report from the Commerce Department showed that the trade deficit narrowed by more than anticipated in the month of August.

The report said the trade deficit narrowed to $42.4 billion in August from a revised $43.6 billion in July. The trade deficit had been expected to narrow to $42.7 billion.

The Commerce Department also released a report showing factory orders jumped by 1.2 percent in August compared to estimates for an increase of 1.0 percent.

Sector News

Reflecting optimism about the economic outlook, financial stocks showed a significant move to the upside on the day. The Dow Jones Banks Index climbed by 1.3 percent, while the NYSE Arca Broker/Dealer Index rose by 1 percent.

Strong gains by financial giants Goldman Sachs (GS) and JP Morgan (JPM) contributed to the continued advance by the Dow.

Considerable strength also emerged among software stocks, as reflected by the 1.2 percent gain posted by the Dow Jones Software Index. The index reached its best closing level in almost a month.

Software giant Microsoft (MSFT) helped lead the sector higher after Canaccord Genuity upgraded its rating on the company's stock to Buy from Hold.

Internet, retail, and oil service stocks also saw some strength on the day, while gold and tobacco stocks moved to the downside.

Other Markets

In overseas trading, stocks across the Asia-Pacific region turned in a lackluster performance on Thursday, with markets in China, Hong Kong, and South Korea closed for holidays. Japan's Nikkei 225 Index closed marginally higher.

Meanwhile, European stocks moved mostly higher over the course of the trading day. The U.K.'s FTSE 100 Index climbed by 0.5 percent and the French CAC 40 Index rose by 0.3 percent, although the German DAX Index closed just below the unchanged line.

In the bond market, treasuries moved to the downside after closing roughly flat for two straight sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2 basis points to a nearly three-month closing high of 2.350 percent.

Looking Ahead

The monthly jobs report will likely be in the spotlight on Friday, overshadowing reports on wholesale trade and consumer credit as well as speeches by several Federal Reserve officials.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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