Global stocks rallied Thursday with another assist from a major central bank. Earlier today, the European Central Bank (ECB) said it plans to keep interest rates on hold longer than market participants previously expected.
That was a nice addition to some dovish comments from Federal Reserve Chair Jerome Powell earlier this week and enough to propel U.S. equities higher Thursday. The Nasdaq Composite and S&P 500 added 0.53% and 0.61% today. The Dow Jones Industrial Average extended its winning streak to three days, rising 0.71%.
Three consecutive days of gains for the Dow Jones is nothing to scoff at, but an imminent test looms in the form of the May jobs report, due out Friday before the open of U.S. markets. Following the tepid ADP private payrolls data out earlier this week, traders could be bracing for a disappointing number tomorrow morning.
Traders may already be preparing for such disappointment as gold finished higher Thursday for a seventh straight day. That’s good for bullion’s best winning streak in a over a year.
Focusing on Thursday’s action, the Dow got some important contributions from a recently downtrodden sector.
Energetic Energy Names
In this order, Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) are the two largest U.S. oil companies. In this order, Chevron and Exxon were two of top three percentage gainers in the Dow on Thursday.
Strength in those Dow components arrived a day after oil prices officially slipped into a bear market and with the S&P 500 Energy Index entering Thursday with a second-quarter loss of nearly 9%. There was not a lot of company-specific news pertaining to the two U.S. oil giants today, indicating the rally in the pair was likely a symptom of oil prices bouncing back today.
Late Wednesday, Exxon said it plans to make additional investments at an offshore block off Angola, which could take production at the block to 40,000 barrels per day once fully operational.
Apple (NASDAQ:AAPL) was another important contributor to the Dow’ Jones today, rising 1.47% after Evercore ISI analyst Amit Daryanani called the stock undervalued based on the potential of the company’s services and iPhone businesses. Daryanani initiated coverage of Apple with an “outperform” rating and a $205 price target.
“We believe the stock is undervalued at these levels,” Daryanani wrote in a note cited by Barron’s. “From a business-line perspective, we believe the company can continue drive strong momentum in services while increasing average selling prices to partially offset iPhone unit declines.”
Shares of Walt Disney (NYSE:DIS) climbed almost 1% after Citigroup reiterated a “buy” rating on the stock while boosting its price target on the theme park and entertainment conglomerate to $160 from $132, implying significant upside from current levels.
Bottom Line on the Dow Jones Today
The Dow Jones is cobbling together some nice gains this week, but as was noted earlier, the May jobs report coming tomorrow represents a significant near-term test for riskier assets.
In addition to the aforementioned winning streak for gold, there is another defensive-related element to consider. Of the exchange-traded funds (ETFs) hitting all-time highs today, 13 were real estate and utilities funds, indicating investors are still favoring lower beta sectors. And that all-time figure does not include several low-volatility funds that are heavy on those two defensive sectors.
Gains are gains, but it would be encouraging to see some of the market’s more cyclical sectors reestablish leadership.
As of this writing, Todd Shriber does not own any of the aforementioned securities.
