Benchmarks gained over 1% yesterday on weaker dollar and drop in bond yields. Thursday’s gains were broad based with the S&P 500 closing at an all-time record high and 9 out of 10 sectors of the index ending in positive territory. Economic data was mixed, giving no clear indication to investors on the timing of first rate hike.
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The Dow Jones Industrial Average (DJI) gained 1.1% to close at 18,252.24. The Standard & Poor’s 500 (S&P 500) also advanced 1.1% to 2,121.10. The tech-laden Nasdaq Composite Index closed at 5,050.79; increasing 1.4%. The fear-gauge CBOE Volatility Index (VIX) dropped 7.4% to settle at 12.74. A total of about 6 billion shares were traded on Thursday, lower than the last five trading days’ average of 6.3 billion. Advancers outpaced declining stocks on the NYSE. For 74% stocks that advanced, 24% declined.
The S&P 500 settled at a record high, beating the previous high it reached on Apr 24 when the index closed at 2,117.69. The Dow also came within 50 points of its all-time record high of 18,288.63, achieved on Mar 2. The Nasdaq too was about 50 points shy of its record close.
Weaker dollar boosted investor sentiment as it increases profit margins of U.S. exporters by making their products cheaper. The euro gained against the dollar to settle at $1.14, just below a 3-month high of about $1.1460. The dollar struggled to gain against the euro as bond yields moved lower.
European Central Bank President Mario Draghi’s commitment to continue its asset purchasing program to stimulate Eurozone’s economy helped stocks recover and bond yields decline. Drop in bond yields eventually boosted Treasury prices on Thursday. The 10-year German government bonds yields decreased 0.2 basis points to 0.712%, while benchmark U.S. 10-year Treasury note yields lost 4.8 basis points to 2.235%.
Also, investors were less concerned about the timing of a rate hike. A couple of economic reports provided less clarity as to when the Federal Reserve will raise interest rates. The U.S. Department of Labor reported that jobless claims decreased 1,000 for the week ending May 9 to 264,000, lower than the consensus estimate of 276,500. Claims for unemployment benefits touched a 15-year low during the week. The 4-week moving average also decreased 7,750 from previous week’s level to 271,750. The 4-week moving average touched its lowest level since Apr 22, 2000.
Additionally, the U.S. Department of Labor reported that the Producer Price Index (PPI) declined 0.4% in April. PPI has now declined for seventh time in last nine months. However, the decline was in contrast to the consensus estimate of 0.1% increase. Lower energy costs were cited to be the reason behind this fall in PPI. Prices of gasoline, natural gas, diesel and jet fuel dropped on a seasonally adjusted basis last month. Moreover, the core PPI (PPI excluding food and energy prices) declined 0.2%, in contrast to the consensus estimate of 0.1% gain.
Separately, gains in technology stocks helped the Nasdaq settle in the green. The Technology SPDR ETF (XLK) gained 1.6%, the highest gainer among the S&P 500 sectors. Key technology stocks including Apple Inc. (AAPL – Analyst Report), Microsoft Corporation (MSFT – Analyst Report), Verizon Communications Inc. (VZ – Analyst Report), Google Inc (GOOGL – Analyst Report) and International Business Machines Corporation ( (IBM – Analyst Report) increased 2.3%, 2.3%, 0.5%, 1.8% and 1%, respectively.
Gains in bio-tech shares also boosted the Nasdaq. Biotech stocks such as Celgene Corporation (CELG – Analyst Report), Amgen Inc. (AMGN – Analyst Report), Gilead Sciences Inc. (GILD – Analyst Report), Regeneron Pharmaceuticals, Inc. (REGN – Analyst Report) and Biogen Inc. ( (BIIB – Analyst Report) increased 1.5%, 2.3%, 2.2% 2.9% and 1.1%, respectively. Overall, the iShares Nasdaq Biotechnology (IBB) gained 1.4%, while the broader Health Care Select Sector SPDR (XLV) also advanced 1.4%.
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