Stocks leapt Thursday after several days of selling pressure, erasing the week’s earlier losses.
All 10 sectors of the S&P 500 closed higher. Biotech was the day’s strongest performer with iShares NASDAQ Biotechnology Index (ETF) (IBB) up 4.4%.
The broad rush to buy was attributed to investors’ belief that the Federal Reserve will delay an interest rate hike until next year. Weak economic data and recent dovish comments by the European Central Bank (ECB) contributed to this feeling.
Consumer prices fell 0.2% in September, meeting estimates, after falling 0.1% in August.
Continuing claims dropped to 2.158 million compared with estimates for a decline to 2.2 million. Initial claims for the week ending Oct. 10 fell to 255,000 versus an expected increase to 269,000.
The Empire State Manufacturing Survey for October came in at -11.4, up from -14.7 the previous month, but below expectations for -8. And the Philadelphia Fed’s Business Outlook Survey showed a reading of -4.5 in October, down from -6 in September, but also below estimates of -2.5.
Comments by the ECB, which has asked the Federal Reserve to delay its first rate hike, helped drive the euro down 0.8% against the U.S. dollar, closing at $1.1383.
Gold was up 0.7% at $1,187.90 an ounce, and crude oil fell 0.6% to $46.38 a barrel.
At Thursday’s close, the Dow Jones Industrial Average rose 217 points to 17,142, the S&P 500 gained 30 points at 2,024, the Nasdaq jumped 87 points to 4,870, and the Russell 2000 was up 26 points at 1,163.
The NYSE Composite’s primary market traded 955 million shares with total volume of 3.7 billion. The Nasdaq crossed a total of 1.9 billion shares. On the Big Board, advancers outpaced decliners by 4.3-to-1, and on the Nasdaq, advancers led by 4.5-to-1.
The S&P 500 closed above resistance at 2,020 by 4 points, but SPDR S&P 500 ETF Trust (SPY) missed punching through its resistance line at $202.92 to $202.89 by a fraction. Volume was below average for the ETF, and its MACD is arching down.
Conclusion
Thursday’s rally was the result of what appears to be short-covering, which was a reaction to weak economic data and the ECB’s plea to the Fed to hold off on a rate hike until next year. And there is precedent for a favorable response from the Fed. Several weeks ago, analysts were almost certain that a hike would come at the September meeting, but a similar request from the ECB may have factored into the delay.
In my opinion, if the Fed does not increase rates in order to placate the ECB, it is not working for Americans. In my 53 years as a financial manager and writer I have not seen the Federal Reserve act in anything but America’s best interest.
It is about time that they received the message that we expect the same from Fed Chair Janet Yellen and her voting members. They must be objective and not minions of Europe.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
