Stocks advanced in a broad-based rebound on Thursday. The major indices rose between 0.4% and 0.5% the day after Federal Reserve Chief Janet Yellen’s comment about stocks being “overvalued” drove a sell-off.
Of the 10 S&P sectors, nine ended in the black with financials, technology, industrials and health care leading. The health care sector was pulled higher by biotech stocks. The iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) rose 1%.
Energy stocks fell, with the Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) off 1.1%. WTI oil lost 3.2% at $58.98 a barrel.
Whole Foods Market, Inc. (NASDAQ:WFM) fell 9.7% after disappointing revenue and same-store sales overshadowed earnings that were in line with expectations. Alibaba Group Holding Ltd (NYSE:BABA) was up 7.5% after it reported quarterly revenues jumped 45%, well above expectations.
The U.S. dollar rose 0.7% against the euro, at $1.127. The dollar’s strength was attributed to initial jobless claims increasing 3,000 to 265,000, which was less than economists’ forecasts.
The yield on the benchmark 10-year Treasury note rose 2.5% to 2.18%. It was the biggest gain in a month.
At Thursday’s close, the Dow Jones Industrial Average gained 82 points at 17,924, the S&P 500 rose 8 points to 2,088, the Nasdaq was up 26 points at 4,946, and the Russell 2000 gained 6 points at 1,226.
The NYSE’s primary exchange traded over 785 million shares with total volume of 3.7 billion. The Nasdaq crossed over 2 billion shares. On the Big Board, advancers outpaced decliners by 1.4-to-1, and on the Nasdaq, advancers led by 1.3-to-1.
The chart of the U.S. Treasury 30-year bond yield indicates that a major change in direction has occurred. This is obviously in anticipation of the Fed’s expected rate hike. The question is, when?
Heavy buying in the euro versus the U.S. dollar has caused a major shift as the Guggenheim CurrencyShares Euro Trust (NYSEARCA:FXE) closed above resistance on Wednesday but failed to hold above it Thursday.
Today’s charts of U.S. interest rates and the euro illustrate why stocks and bonds have been so volatile. First, the bond’s yield reversed course in late January with a major rise in interest rates generated not by the Fed but by sellers positioning for a rate hike at a future date.
The euro initially reacted by selling off, making a bottom in mid-February and double-bottoming in April, as European bankers murmured of rate hikes to come from them, as well, but much later.
The question now is: Can the euro maintain its lofty heights?
We can conclude from these charts the reason why many economists think not. Most are of the opinion that the closer we get to a rate hike, the stronger the dollar will become as both the higher rates and the strength of the American economy versus others influence the price of all assets. Money always flows to where it is best treated.
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.