Stocks headed higher despite rising unemployment claims and lower retail sales, as buyers became convinced the contraction was over.
Stocks headed higher on Thursday, as bullish chart patterns for the major stock indices, as well as other upbeat technical indicators, offset
disappointment resulting from an 8,000-claim increase in weekly initial unemployment claims to 339,000 and a 0.4 percent decline in retail sales during January. Investors were content to disregard the disappointing readings as results of the horrible winter weather.
Meanwhile, the stock market’s apparent escape from its recent contraction attracted more buyers. After the Dow Jones Industrial Average dropped below its 200-day moving average on Monday, February 3, an advance on Friday, equivalent to that seen on Thursday, would bring the Dow back to its 50-day moving average. Charts for all of the major stock indices now have bullish, inverse “head-and-shoulders” patterns.
The Dow Jones Industrial Average (DIA) picked up 63 points to finish Thursday’s trading session at 16,027 for a 0.40 percent advance, bringing the Dow just 64 points below its 50-day moving average. The S&P 500 (SPY) climbed 0.58 percent to close at 1,829.
The Nasdaq 100 (QQQ) surged 0.89 percent to finish at 3,659. The Russell 2000 (IWM) jumped 1.35 percent to end the day at 1,147. Technology Boom
In other major markets, oil (USO) advanced 0.20 percent to close at $35.87.
On London’s ICE Futures Europe Exchange, March futures for Brent crude oil advanced 25 cents (0.23 percent) to $108.60/bbl. (BNO).
April gold futures advanced $7.60 (0.59 percent) to $1,302.60 per ounce (GLD).
The transportation sector finally made it back to its cruising altitude on Thursday, as the Dow Jones Transportation Average climbed 0.25 percent to 7,281, rising above its 50-day moving average of 7,273 (IYT).
In Japan, the exchange rate for the yen continued to be the dominant factor in stock market activity. Japanese stocks fell as the yen strengthened to 102.04 per dollar during the last half-hour of Thursday’s trading session in Tokyo. A stronger yen causes Japanese exports to be less competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average sank 1.79 percent to 14,534 (EWJ).
Ongoing headaches caused by China’s shadow banking system sent stocks lower in Shanghai and Hong Kong. A product distributed by the China Construction Bank failed to repay investors, providing a grim reminder of the yet-to-be-resolved problem besetting the Chinese financial system. The Shanghai Composite Index declined 0.55 percent to 2,098 (FXI). Hong Kong’s Hang Seng Index fell 0.54 percent to 22,165 (EWH).
In Europe, excitement about the upbeat outlook for Renault and its impact on the French economy was offset by disappointing earnings from the banking sector. Nevertheless, Renault’s share price soared 5.59 percent higher. The Euro STOXX 50 Index finished Thursday’s session with a 0.10 percent advance to 3,097 – climbing further above its 50-day moving average of 3,048. Its Relative Strength Index is 57.93 (FEZ). Eurozone GDP data for the fourth quarter of 2013 will be released on Friday and we will learn whether France fell back into recession.
Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,810, by finishing Thursday’s trading session with a 0.58 percent advance to 1,829. Its Relative Strength Index (RSI) rose from 55.40 to 58.06. The MACD is climbing above the signal line, suggesting that the S&P could continue its advance during the immediate future.
On Thursday, all sectors were in positive territory. The industrial sector was the laggard, with a 0.08 percent advance.
Consumer Discretionary (XLY): +0.31%
Technology: (XLK): +0.73%
Industrials (XLI): +0.08%
Materials: (XLB): +0.86%
Energy (XLE): +0.47%
Financials: (XLF): +0.37
Utilities (XLU): +1.09%
Health Care: (XLV): +0.71
Consumer Staples (XLP): +0.51%
Bottom line: Downbeat reports on initial unemployment claims and January retail sales failed to discourage investors on Thursday, as improving technical indicators for the major stock indices suggested that the recent stock market contraction may have ended.
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