On Thursday, U.S. stocks ended higher with the S&P 500 index (SPX) recording a new closing high which overshadowed the host of smaller losses during the week.
With this week’s economic reports out of the U.S. unable to clarify when the Federal Reserve will increase interest rates for the first time since 2006, U.S. stocks rallied on Thursday.
On the same day, a report was released by the Department of Labor which indicated an unexpected decline in weekly jobless claims. That is, 264,000 people filed for initial jobless benefits in the week ending on the 9th of May. This was a decline of 1,000 compared to the previous week's total of 265,000. This data gave some insights into a stabilizing employment picture while the measure of inflation indicated that headline inflation is dropping below the 2% target set by the central bank. This is the target the Fed is seeking before it will feel comfortable to hike interest rates.
The S&P 500 (SPX) increased by 22.62 points, or 1.1 percent, closing at 2,121.10, on course for weekly gains of 0.2 percent. The benchmark index registered a new closing record high since the 24th April, when the SPX closed at 2,117.69. Consumer staples and tech stocks performed the best out of the S&P 500’s 10 sectors with all 10 closing in the green.
Meanwhile, the Nasdaq Composite index (COMP) increased 69.10 points, or 1.4 percent, closing at 5,050.80, tracking at almost 1 percent weekly gain. Also, the Dow Jones Industrial Average (DJIA) rose 191.75 points, or 1.1 percent, closing at 18,252.24, only 0.2 percent short of its all-time high of 18,288.63 which it reached on the 2nd March. The Dow is on track for a 0.3 percent weekly gain.
Thursday’s increase is a breakthrough in months of mostly a sideways market. Over the last 6 months, the markets lack of conviction, a mix of economic data as well as the ongoing debate around when the Fed will start hiking interest rates have all kept investors trying to determine exactly where stocks are heading, said Commonwealth Financial’s chief investment officer, Brad McMillan. He also believes that in another month, the markets may see real breakout if economic data firms up, more specifically in retail sales.
Among other things, investors have been slightly distracted, focusing on the volatility in the bond market. On Thursday in a note, Katie Stockton, a technical strategist working at BTIG said, a SPX breakout was not a big event as investors have been focusing further than the equity market. Stockton also added that as the earnings season draws to a close, it should be noted that support levels remain intact for all the major indices and breakdowns were not very evident among individual stocks.
The gains on Thursday come after U.S. stocks on Wednesday virtually closed unchanged as earlier gains faded. Disappointing U.S. retail data sent the dollar (USD) into a sharp decline on Wednesday.
MT4 Chart: S&P 500
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