logo
  

U.S. Stocks Pull Back Off Best Levels But Remain Positive

wallstreet oct03 29jul21 lt

Following the mixed performance seen in the previous session, stocks moved mostly higher during trading on Thursday. With the upward move on the day, the Dow and the S&P 500 set new record intraday highs.

The major averages pulled back off their best levels in afternoon trading but managed to remain positive. The Dow climbed 153.60 points or 0.4 percent to 35,084.53, the Nasdaq inched up 15.68 points or 0.1 percent to 14,778.26 and the S&P 500 rose 18.51 points or 0.4 percent to 4,419.15.

The strength on Wall Street came despite the release of some disappointing U.S. economic data, including a report from the Commerce Department showing economic growth fell well short of estimates in the second quarter.

The weaker than expected data may have added to optimism the Federal Reserve will not be in a hurry to begin scaling back its asset purchases.

On Wednesday, the Fed noted progress has been made towards the central bank's maximum employment and price stability goals, although Fed Chair Jerome Powell noted there is still "some ground to cover on the labor market side."

The Commerce Department said real GDP surged up by 6.5 percent in the second quarter following a 6.3 percent jump in the first quarter. Economists had expected GDP to spike by 8.5 percent.

The GDP growth in the second quarter reflected increases in consumer spending, non-residential fixed investment, exports, and state and local government spending.

However, decreases in private inventory investment, residential fixed investment, and federal government spending limited the upside along with an increase in imports, which are a subtraction in the calculation of GDP.

"The good news is that the economy has now surpassed its pre-pandemic level," said Paul Ashworth,
Chief U.S. Economist at Capital Economics.

He added, "But with the impact from the fiscal stimulus waning, surging prices weakening purchasing power, the delta variant running amok in the south and the saving rate lower than we thought, we expect GDP growth to slow to 3.5% annualized in the second half of this year."

Meanwhile, the Labor Department released a report showing a modest pullback in initial jobless claims in the week ended July 24th.

The report said initial jobless claims dipped to 400,000, a decrease of 24,000 from the previous week's revised level of 424,000.

Economists had expected jobless claims to drop to 380,000 from the 419,000 originally reported for the previous week.

The National Association of Realtors also released a report showing an unexpected pullback in pending home sales in the month of June.

NAR said its pending home sales index tumbled by 1.9 percent to 112.8 in June after soaring by 8.3 percent to a revised 115.0 in May.

The pullback surprised economists, who had expected pending home sales to edge up by 0.3 percent compared to the 8.0 percent spike originally reported for the previous month.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Sector News

Steel stocks showed a substantial move to the upside, driving the NYSE Arca Steel Index up by 3 percent to its best closing level in well over two months.

Significant strength was also visible among housing stocks, as reflected by the 2.8 percent spike by the Philadelphia Housing Sector Index.

Gold stocks also saw considerable strength on the day, resulting in a 2.5 percent jump by the NYSE Arca Gold Bugs Index.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for August delivery surging up $31.50 to $1,831.20 an ounce.

Semiconductor and networking stocks also showed strong moves to the upside, while some weakness emerged among airline and biotechnology stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index climbed by 0.7 percent, while China's Shanghai Composite Index jumped by 1.5 percent.

The major European markets also moved to the upside on the day. While the U.K.'s FTSE 100 Index advanced by 0.9 percent, the German DAX Index and the French CAC 40 Index rose by 0.5 percent and 0.4 percent, respectively.

In the bond market, showed a lack of direction over the course of the session before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, crept up by less than a basis point to 1.269 percent.

Looking Ahead

Reaction to the latest earnings news may drive trading on Friday, with Amazon (AMZN), First Solar (FSLR), Pinterest (PINS), and T-Mobile (TMUS) among the companies releasing their quarterly results after the close of today's trading.

Caterpillar (CAT), Chevron (CVX), Colgate-Palmolive (CL), Exxon Mobil (XOM), Newell Brands (NWL), and Procter & Gamble (PG) are also among the companies due to report their results before the start of trading on Friday.

Trading on Friday may also be impacted by another batch of U.S. economic data, including reports on personal income and spending, Chicago-area business activity and consumer sentiment.

For comments and feedback contact: editorial@rttnews.com

Market Analysis

Follow RTT