News Column

Stocks Moving Notably Higher Following Early Volatility - US Commentary

June 5, 2014

WASHINGTON (Alliance News) - After initially showing a lack of direction, stocks have moved notably higher over the course of the trading day on Thursday. The gains on the day have lifted the Dow and the S&P 500 to new record highs, while the Nasdaq has reached its best level in two months.

The major averages have seen some further upside in recent trading, reaching new highs for the session. The Dow is up 91.84 points or 0.6% at 16,829.37, the Nasdaq is up 31.98 points or 0.8% at 4,283.62 and the S&P 500 is up 10.16 points or 0.5% at 1,938.04.

The strength that has emerged on Wall Street partly reflects a positive reaction to new stimulus measures announced by the European Central Bank.

The ECB announced its decision to cut its benchmark interest rate by 10 basis points to 0.15% and also lowered its deposit rate to negative 0.1%.

Additionally, ECB President Mario Draghi announced a package of additional initiatives to stimulate the economy and said the bank is preparing to start buying asset-backed securities.

Peter Boockvar, managing director at the Lindsey Group, said, "Bottom line, of the realistic moves the ECB could make, Draghi is looking to enact all of them."

"Of what will actually work, it will likely be the ABS purchases, but that market needs to get bigger before the ECB has enough to buy to make it impactful," he added.

Meanwhile, traders have largely shrugged off a report from the Labor Department showing a modest rebound in initial jobless claims in the week ended May 31st.

The report said initial jobless claims rose to 312,000, an increase of 8,000 from the previous week's revised level of 304,000. Economists had expected claims to climb to 310,000.

Despite the increase, the Labor Department said the less volatile four-week moving average dipped to 310,250, its lowest level since the week ended June 2, 2007.

Friday morning, the Labor Department is scheduled to release a separate report on the employment situation in the month of May.

The consensus estimate calls for employment to increase by about 215,000 jobs in May after jumping by 288,000 jobs in April.

Sector News

Networking stocks have shown a substantial move to the upside on the day, driving the NYSE Arca Networking Index up by 2.5%. The index is regaining some ground after closing lower for four consecutive sessions.

Ciena (CIEN) has helped to lead the sector higher, with the provider of fiber-optic networking equipment surging up by 18.4% after reporting better than expected second quarter results and providing upbeat guidance.

Significant strength has also emerged among gold stocks, as reflected by the 1.8% gain being posted by the NYSE Arca Gold Bugs Index. The strength in the sector comes as gold for August delivery is climbing USD10 to USD1,254.30 an ounce.

Railroad stocks are also seeing considerable strength in mid-day trading, resulting in a 1.5% gain by the Dow Jones Railroads Index. With the gain, the index has reached a new record intraday high.

Steel, housing, and internet stocks are also posting notable gains on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan'sNikkei 225 Index crept up by 0.1%, while Hong Kong'sHang Seng Index dipped by 0.2%.

The major European markets also ended the day mixed. While the UK'sFTSE 100 Index edged down by 0.1%, the German DAX Index rose by 0.2% and the French CAC 40 Index surged up by 1.1%.

In the bond market, treasuries are moving modestly higher after trending lower over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.4 basis points at 2.582%.

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Source: Alliance News