Stocks Hit New Record Highs

Thursday brought an abundance of better-than-expected economic reports which sent stocks skyward, with the major stock indices setting new records. The disappointing report on Construction Spending – which fell 0.6 percent in June, despite expectations of a 0.4 percent increase – was being blamed on God by those of the cynical persuasion. Spending on religious construction really went to hell in June, falling by a sinful 6.8 percent.

The Department of Labor reported that its weekly tally of initial unemployment claims unexpectedly dropped to 326,000 – the lowest level since January of 2008.

July Purchasing Managers’ Index reports from both Markit Economics and the Institute for Supply Management beat economists’ expectations. The Markit U.S. Manufacturing PMI climbed to 53.7 from June’s 51.9. Economists were expecting a less-significant advance to 53.1. The Institute for Supply Management’s July 2013 Manufacturing ISM Report on Business indicated that its headline PMI rose to 55.5 percent from June’s 50.9 percent. Economists were expecting a more modest increase to 53.1 percent.

The Dow Jones Industrial Average (DIA) jumped 128 points to finish Thursday’s trading session at a record-high close of 15,628.02 for a 0.83 percent advance. The Dow also hit a new intraday record high of 15,650.69. The S&P 500 (SPY) soared 1.25 percent to finish above 1,700 for the first time at a record-high close of 1,706.87, after hitting an intraday record high of 1,707.85.

The Nasdaq 100 (QQQ) surged 1.17 percent to finish at 3,126. The Russell 2000 (IWM) jumped 1.40 percent to its latest record-high close at 1,059.

In other major markets, oil (USO) skyrocketed 2.47 percent to close at $38.27.

On London’s ICE Futures Europe Exchange, September futures for Brent crude oil advanced by $1.70 (1.58` percent) to $109.40/bbl. (BNO).

August Gold Futures declined by $3.90 (0.300 percent) to $1,308.50 per ounce (GLD).

Transports went superluminal on Thursday, with the Dow Jones Transportation Average (IYT) jumping 3.25 percent.

In Japan, stocks skyrocketed as the yen weakened to 98.33 per dollar just before Thursday’s closing bell in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). Solid earnings reports – especially from the nation’s financial sector – helped fuel Thursday’s rally. Mizuho Financial Group reported a massive, 35-percent jump in profits during the second quarter. Mitsubishi UFJ (the bank) did even better with a 40-percent profit surge (EWJ).

In China, stocks soared after official the NBS manufacturing Purchasing Managers’ Index unexpectedly rose to 50.3 in July, from 50.1 in June. (Hint: The “N” in NBS does not stand for “no”. NBS actually refers to the National Bureau of Statistics.) Nevertheless, the HSBC China Manufacturing PMI for July fell to an 11-month low of 47.7 from 48.2 in June. A result below 50 indicates contraction. The HSBC PMI covers many smaller businesses, which the NBS does not include. The Shanghai Composite Index jumped 1.77 percent to close at 2,029 (FXI). Hong Kong’s Hang Seng Index surged 0.94 percent to finish the session at 22,088 (EWH).

Rob Dobson of Markit Economics was wearing the Santa suit on a hot summer day, as his final Markit Eurozone Manufacturing PMI report for July indicated even more expansion than the flash estimate, sending European stocks skyward on Thursday (VGK). The final Eurozone Manufacturing PMI for July rose to 50.3 from the flash reading of 50.1, hitting its highest level in two years.

The Euro STOXX 50 Index finished Thursday’s session with a 1.26 percent jump to 2,808 – climbing further above its 50-day moving average of 2,689. Its Relative Strength Index is 69.23 (FEZ). Most investors consider an RSI above 70 as an “overbought” signal.

Technical indicators reveal that the S&P 500 continued to soar above its 50-day moving average of 1,646 after finishing Thursday’s session with a 1.25 percent surge to its latest record-high close of 1,706.87. At this point, bears are hoping to see the formation of a head-and-shoulders pattern on the S&P chart. Its Relative Strength Index jumped from 61.57 to 69.25. If the S&P breaks above the “overbought” threshold of 70, many investors could take that as a “sell” signal, resulting in a pullback. After dipping below the signal line on Wednesday, the MACD has climbed back to meet it. If the MACD crosses above the signal line, this would suggest a likely advance.

For Thursday, all sectors were solidly in positive territory. The industrial sector led the group, with a 1.71 percent surge. The healthcare sector was the laggard, advancing by a modest 0.63 percent.

Consumer Discretionary (XLY): +1.55%

Technology: (XLK): +1.07%

Industrials (XLI): +1.71%

Materials: (XLB): +0.74%

Energy (XLE): +1.63%

Financials: (XLF): +1.59%

Utilities (XLU): +0.84%

Health Care: (XLV): +0.63%

Consumer Staples (XLP): +0.82%

Bottom line: An unexpected drop in the weekly total of initial unemployment claims to its lowest level since January of 2008 combined with better-than-expected PMI reports from both Markit Economics and the ISM to send the Dow, S&P and the Russell 2000 indices to new record highs on Thursday.

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