On Thursday, stocks rebounded from their slump as the drop in weekly unemployment claims raised hopes for a strong non-farm payrolls report.
Stocks finally headed higher on Thursday after the Department of Labor reported that initial unemployment claims for the last week in January declined by 20,000 to 331,000. The news raised hopes that Friday’s release of the January non-farm payrolls report would beat expectations of 181,000 new jobs during January. After Monday’s release of the disappointing January 2014 Manufacturing ISM Report on Business from the Institute for Supply Management (ISM) – which indicated that manufacturing PMI dropped to 51.3 percent from December’s 56.5 percent, the major stock indices have been struggling. Positive news from the Bureau of Labor Statistics on Friday could give some “legs” to Thursday’s stock market rally.
The Dow Jones Industrial Average (DIA) picked up 188 points to climb back above its 200-day moving average and finish Thursday’s trading session at 15,628 for a 1.22 percent advance. The S&P 500 (SPY) jumped 1.24 percent to close at 1,773.
The Nasdaq 100 (QQQ) also jumped 1.24 percent to finish at 3,497. Nevertheless, the Nasdaq 100 remains below its 50-day moving average, which is currently 3,523. The Russell 2000 (IWM) climbed 0.94 percent to end the day at 1,103.
In other major markets, oil (USO) advanced 0.55 percent to close at $34.90.
On London’s ICE Futures Europe Exchange, March futures for Brent crude oil advanced $1.14 (1.08 percent) to $106.80/bbl. (BNO).
April gold futures advanced $1.00 (0.08 percent) to $1,257.90 per ounce (GLD).
The transportation sector was up and running again on Thursday, as the Dow Jones Transportation Average climbed 1.50 percent to 7,181, while remaining below its 50-day moving average of 7,272 (IYT).
In Japan, the exchange rate for the yen continued to be the dominant factor in stock market activity. Japanese stocks dipped as the exchange rate for the yen remained relatively unchanged at 101.42 per dollar during the last hour of Thursday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average declined 0.18 percent to 14,155 (EWJ).
In mainland China, the stock markets were closed for the Lunar New Year. Last Thursday, stocks declined after Markit Economics released the final reading on the HSBC China Manufacturing PMI for January, which indicated a drop to a six-month low of 49.5, a worse result than the flash reading of 49.6. A reading above 50 indicates expansion and a reading below 50 indicates contraction. The Shanghai Composite Index dropped 0.82 percent on January 30 to 2,033 (FXI).
Macau casino stocks rebounded on Thursday to help send Hong Kong’s Hang Seng Index 0.72 percent higher to 21,423 (EWH).
In Europe, stocks soared after the European Central Bank decided to hold its key interest rate at 0.25 percent. Both Volvo and Daimler AG beat earnings estimates, helping to fuel investor enthusiasm. The Euro STOXX 50 Index soared 1.63 percent to 3,010 – while remaining below its 50-day moving average of 3,049. Its Relative Strength Index is 43.85 (FEZ).
Technical indicators revealed that the S&P 500 remained below its 50-day moving average of 1,809 despite jumping 1.24 percent to finish Thursday’s trading session at 1,773. Its Relative Strength Index (RSI) climbed from 35.37 to 42.87. The MACD finally reversed course and began creeping higher, suggesting that the S&P could continue its advance during the immediate future.
On Thursday, all sectors were solidly in positive territory. The healthcare sector was the laggard, with a 0.56 percent advance. Small Cap Value Style
Consumer Discretionary (XLY): +2.11%
Technology: (XLK): +1.11%
Industrials (XLI): +1.39%
Materials: (XLB): +1.50%
Energy (XLE): +1.49%
Financials: (XLF): +1.55%
Utilities (XLU): +0.73%
Health Care: (XLV): +0.56%
Consumer Staples (XLP): +1.07%
Bottom line: As the stock market was in sore need of upbeat economic news to help it climb from its recent slump, the reduction in weekly unemployment claims for the final week of January raised hopes that Friday’s release of the January non-farm payrolls report could bring a sustained advance for stock prices.
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