The Dow finally recorded its first close above the 16,000 mark yesterday driven by encouraging jobs data. The Nasdaq too finished in the green while the S&P 500 snapped its three-day losing streak. Meanwhile, annual inflation rate came in lower than the Federal Reserve’s target. President of the Federal Reserve Bank of St. Louis and a voting member of the FOMC, James Bullard, said inflation data gives the central bank some scope to continue with its accommodative policy. All the sectors in S&P 500 industry groups ended in the green, with financials leading the gains.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) climbed 0.7% to close the day at 16,009.99. The S&P 500 increased 0.8% to finish yesterday’s trading session at 1,795.85. The tech-laden Nasdaq Composite Index gained 1.2% to end at 3,969.15. The fear-gauge CBOE Volatility Index (VIX) dropped 5.52% to settle at 12.66. Consolidated volumes on the New York Stock Exchange were roughly 3.3 billion shares. Advancing stocks outnumbered the decliners. For 72% shares that advanced, 25% declined.
Stocks moved higher on Thursday after initial claims numbers dropped to a near two- month low. Meanwhile, a drop in the producer price index for the second straight month in October indicated a lower rate of inflation. Expectations that the Federal Reserve could start reducing stimulus with minimal changes in interest rates have helped increase the margin between long run and short-run debt. This in turn will benefit banking institutions, who benefit from borrowing at short rates and lending at longer rates
James Bullard said inflation and jobs data is providing the central bank with reasons to continue the stimulus program. Bullard said: “What we need to do is continue with the program for now as we have, but if an inflation problem starts to develop, we have to be willing to move to arrest that problem”.
Coming to jobless numbers, the U.S. Department of Labor reported that initial claims decreased 21,000 to 323,000 in the week ending on November 16, from previous week’s figure of 344,000. This was considerably below the consensus estimate of 335,000.
Separately, the U.S. Bureau of Labor Statistics reported that the U.S. Producer Price Index (PPI) for finished goods decreased 0.2% in October, in line with the consensus estimate. In the month of October, prices for finished energy goods dropped by 1.5%. The PPI for intermediate materials, supplies and components declined 0.4%, with the crude materials for further processing dropping 0.9% in October.
Shares of Target Corporation (NYSE:TGT) declined nearly 3.5% after the company’s earnings dropped year on year. Quarterly earnings including U.S. and Canadian operations came in at 54 cents a share, sharply lower than the 96 cents reported in the prior-year quarter. Consequently, the company trimmed its earnings forecast. Revenues also fell short of the Street’s estimates.
Shares of Dollar Tree, Inc. (NASDAQ:DLTR) declined nearly 6.4%. The company reported an increase of nearly 3.1% in same-store sales in the third quarter. Major support came from sale of consumables products like frozen foods, beverages, and seasonal items. The company’s net income dropped to $125.4 million, in comparison with $155.4 million, a year earlier. Dollar Tree also said fourth-quarter expected earnings would range from $1.0 to $1.07 per share based upon expected sales of $2.25 billion to $2.31 billion.
The financial sector was the biggest gainer among the S&P 500 industry groups and the Financials SPDR (XLF) gained 1.4%. Stocks such as JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), Berkshire Hathaway Inc. (NYSE:BRK.B), Bank of America Corp (NYSE:BAC) and Citigroup Inc. (NYSE:C) added 2.0%, 1.1%, 1.3%, 3.0% and 1.9% respectively.
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