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Stocks Show Strong Move Back To The Upside - U.S. Commentary


Stocks moved notably higher over the course of the trading day on Thursday, more than offsetting the modest pullback seen in the previous session. With the upward move, the major averages climbed to new record closing highs.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow jumped 205.60 points or 0.8 percent to 25,574.73, the Nasdaq advanced 58.21 points or 0.8 percent to 7,211.78 and the S&P 500 climbed 19.33 points or 0.7 percent to 2,767.56.

The rebound on Wall Street was partly due to easing concerns about treasuries after China dismissed a Bloomberg News report that officials have recommended slowing or halting purchases of U.S. debt.

"The news could quote the wrong source of information, or may be fake news," China's State Administration of Foreign Exchange said, according to Reuters.

The SAFE said China has been diversifying its foreign currency reserves investments to help "safeguard the overall safety of foreign exchange assets and preserve and increase their value."

Meanwhile, traders largely shrugged off a report from the Labor Department showing another unexpected increase in first-time claims for U.S. unemployment benefits.

The report said initial jobless claims rose to 261,000 in the week ended January 6th, an increase of 11,000 from the previous week's unrevised level of 250,000.

The modest increase came as a surprise to economists, who had expected initial jobless claims to edge down to 245,000.

A separate report from the Labor Department unexpectedly showed a modest decrease in producer prices in the month of December.

The Labor Department said its producer price index for final demand edged down by 0.1 percent in December after climbing by 0.4 percent in November. Economists had expected prices to rise by 0.2 percent.

Excluding food and energy prices, core producer prices still dipped by 0.1 percent in December following a 0.3 percent increase in November. Core prices had also been expected to tick up by 0.2 percent.

Sector News

Airline stocks showed a particularly strong move to the upside on the day, adding to the gains posted in the previous session. The NYSE Arca Airline Index surged up by 3.9 percent to its best closing level in nearly six months.

Within the airline sector, Delta Air Lines (DAL) posted a notable gain after beating fourth quarter expectations and raising its 2018 earnings guidance.

Significant strength was also visible among energy stocks, which benefited from a continued increase by the price of crude oil.

After rising as high as $64.77 a barrel, crude oil for February delivery gave back ground but still rose $0.23 to a three-year closing high of $63.80 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index and the Natural Gas Index jumped by 2.4 percent and 2.3 percent, respectively, and the NYSE Arca Oil & Gas Index advanced by 1.9 percent.

Steel, trucking, housing and computer hardware stocks also saw considerable strength, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Thursday. Japan's Nikkei 225 Index fell by 0.3 percent, while Hong Kong's Hang Seng Index inched up by 0.2 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index edged up by 0.2 percent, the French CAC 40 Index dipped by 0.3 percent and the German DAX Index slid by 0.6 percent.

In the bond market, treasuries turned higher over the course of the session after seeing early weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 1.9 basis points to 2.531 percent.

Looking Ahead

Earnings news is likely to move into the spotlight on Friday, as financial giants JPMorgan Chase (JPM) and Wells Fargo (WFC) are due to report their quarterly results before the start of trading.

Economic data may also attract attention, with traders likely to keep a close eye on reports on retail sales and consumer price inflation.

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