ECB Stimulus News Leads To Rally On Wall Street - U.S. Commentary

(RTTNews) - Stocks moved sharply higher over the course of the trading session on Thursday, as traders reacted positively to the European Central Bank's highly anticipated decision to implement quantitative easing. The gains on the day extended the upward move seen in the three previous sessions.

The major averages moved roughly sideways going into the close, hovering near their best levels of the day. The Dow surged up 259.70 points or 1.5 percent to 17,813.98, the Nasdaq soared 82.98 points or 1.8 percent to 4,750.40 and the S&P 500 jumped 31.03 points or 1.5 percent to 2,063.15.

The rally on Wall Street came following European Central Bank President Mario Draghi's announcement of an expanded asset purchase program.

Draghi said the ECB will purchase 60 billion euros per month worth of securities, including investment grade sovereign bonds, beginning in March.

The expanded asset purchase program is currently scheduled to last until September of 2016, although Draghi said purchases would continue until there is a sustained improvement in inflation.

Optimism about the additional stimulus providing a boost to the European economy seemed to overshadow any concerns about potential risks to the national central banks.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "The action in stocks is just Pavlovian to any form of central bank accommodation and today is no different."

"The transmission though of these newly printed euros into actual stock purchases is specious and thus buying stocks on ECB QE news is more superstition than based on substance in the U.S.," he added.

On the U.S. economic front, the Labor Department released a report before the start of trading showing a modest drop in first-time claims for U.S. unemployment benefits in the week ended January 17th.

The report said initial jobless claims fell to 307,000, a decrease of 10,000 from the previous week's revised level of 317,000. Economists had expected jobless claims to slide to 300,000.

Sector News

While most of the major sectors moved to the upside on the day, airline stocks posted particularly strong gains. The NYSE Arca Airline Index surged up by 3.9 percent to its best closing level in almost thirteen years.

Southwest Airlines (LUV) helped to lead the sector higher, soaring by 8.4 percent after reporting better than expected fourth quarter earnings.

Considerable strength was also visible among banking stocks, as reflected by the 3.7 percent gain posted by the Dow Jones Banks Index. With the gain, the index climbed further off the three-month closing low it set last Thursday.

KeyCorp (KEY) turned in one of the banking sector's best performances, jumping by 7.6 after reporting fourth quarter earnings that beat analyst estimates.

Railroad, computer hardware, brokerage, and trucking stocks also saw significant strength on the day, while gold stocks bucked the uptrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index advanced by 0.7 percent.

The major European markets also showed strong moves to the upside on the day. While the U.K's FTSE 100 Index jumped by 1 percent, the German DAX Index and the French CAC 40 Index surged up by 1.3 percent and 1.5 percent, respectively.

In the bond market, treasuries moved steadily lower for much of the session, extending the downward move seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.3 basis points to 1.896 percent.

Looking Ahead

While reaction to the ECB announcement may continue to impact trading on Friday, traders are also likely to keep an eye on reports on U.S. existing home sales and leading economic indicators.

Trading could also be impacted by reaction to earnings news from General Electric (GE), Honeywell (HON), and McDonald's (MCD), which are due to report their quarterly results before the start of trading on Friday.