Bernanke-Inspired Rally Lifts Dow, S&P 500 To Record Highs - U.S. Commentary

(RTTNews) - Stocks moved sharply higher over the course of the trading day on Thursday, extending the upward trend seen in recent weeks. The markets benefited from a positive reaction to comments from Federal Reserve Chairman Ben Bernanke.

The major averages continued to perform well in late trading, closing near their best levels of the day. The Dow jumped 169.26 points or 1.1 percent to 15,460.92, the Nasdaq soared 57.55 points or 1.6 percent to 3,578.30 and the S&P 500 surged up 22.40 points or 1.4 percent to 1,675.02.

With the gains on the day, the Dow and the S&P 500 reached new record closing highs, while the Nasdaq hit its best closing level since September of 2000.

The rally on Wall Street came as Bernanke's remarks from after the close of trading on Wednesday offset some of the recent concerns about the outlook for monetary policy.

Answering questions following a speech at a conference sponsored by the National Bureau of Economic Research, Bernanke indicated that highly accommodative monetary policy will be in place for the foreseeable future.

Bernanke also noted that there would not be an automatic increase in interest rates when the U.S. unemployment hits the Fed's target of 6.5 percent

Fed officials have recently stressed that monetary policy will remain highly accommodative even as the central bank begins to scale back its asset purchase program.

Meanwhile, traders largely shrugged off a report from the Labor Department showing an unexpected increase in initial jobless claims in the week ended July 6th.

The report said initial jobless claims rose to 360,000, an increase of 16,000 from the previous week's revised figure of 344,000.

The increase surprised economists, who had been expecting jobless claims to dip to 340,000 from the 343,000 originally reported for the previous week.

Peter Boockvar of Morgan Stanley said, "While I take note of the unexpected jump in claim filings, the data should be taken with a grain of salt at least this week due to the July 4th holiday, some seasonality with the end of the school year and also scheduled auto plant shutdowns."

A separate report from the Labor Department showed an unexpected decrease in import prices in the month of June, with a drop in non-fuel prices more than offsetting a modest increase in fuel prices.

Sector News

While most of the major sectors showed notable moves to the upside, gold stocks posted particularly strong gains on the day. Reflecting the strength in the gold sector, the NYSE Arca Gold Bugs Index surged up by 7.9 percent.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for August delivery jumping $32.50 to $1,279.90 an ounce.

Substantial strength was also visible among housing stocks, as reflected by the 4.9 percent gain posted by the Philadelphia Housing Sector Index. D.R. Horton (DHI) and Lennar (LEN) turned in two of the housing sector's best performances.

Steel stocks also saw considerable strength on the day, with the NYSE Arca Steel Index rising by 4 percent. Mechel (MTL) helped to lead the sector higher, surging up by 9.8 percent.

Biotechnology, networking, commercial real estate, and software stocks also posted strong gains, reflecting the broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved to the upside during trading on Thursday. Japan's Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng Index surged up by 2.6 percent.

The major European markets also saw some strength on the day. While the German DAX Index jumped by 1.1 percent, the French CAC 40 Index and the U.K.'s FTSE 100 advanced by 0.7 percent and 0.6 percent, respectively.

In the bond market, treasuries moved sharply higher on the heels of the comments from Bernanke. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 10.6 basis points to 2.574 percent.

Looking Ahead

Earnings news is likely to attract some attention on Friday, with financial giants JP Morgan (JPM) and Wells Fargo (WFC) scheduled to release their quarterly results before the start of trading.

Trading may also be impacted by the release of reports on producer prices and consumer sentiment as well as comments by some Fed officials.