Stocks Close Sharply Higher Amid Pullback By The Dollar - U.S. Commentary

(RTTNews) - After trending lower over the past several sessions, stocks saw substantial strength during trading on Thursday. The gains on the day came after the major averages ended the previous session at their worst closing levels in a month.

The major averages saw further upside going into the close, ending the session near their best levels of the day. The Dow jumped 259.83 points or 1.5 percent to 17,895.22, the Nasdaq climbed 43.35 points or 0.9 percent to 4,893.29 and the S&P 500 surged up 25.71 points or 1.3 percent to 2,065.95.

The rally on Wall Street was partly due to a pullback by the U.S. dollar, which gave back ground following recent strength.

The U.S. dollar has fallen to 121.33 yen compared to the 121.45 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0622 compared to yesterday's $1.0547.

Disappointing retail sales data weighed on the dollar, with a report from the Commerce Department showing that retail sales unexpectedly fell for the third straight month in February.

The Commerce Department said retail sales slid by 0.6 percent in February following a 0.8 percent decrease in January. The drop surprised economists, who had expected sales to rise by 0.3 percent.

Excluding a steep drop in auto sales, retail sales still edged down by 0.1 percent in February compared to economist estimates for a 0.5 percent increase.

Along with contributing to the pullback by the dollar, the retail sales data also offset some of the recent concerns about the outlook for interest rates.

Traders also reacted positively to news that the Federal Reserve gave several major banks approval to launch capital repurchase programs and dividend increases.

Financial giants Citigroup (C), JP Morgan (JPM), and Morgan Stanley (MS) are among the companies that raised their dividends and announced stock buyback plans.

Sector News

Following the news of the buybacks and dividend increases, financial stocks turned in some of the market's best performances on the day.

Reflecting the strength in the financial sector, the Dow Jones Banks Index and the NYSE Arca Broker/Dealer Index jumped by 2.4 percent and 2.1 percent, respectively.

Considerable strength was also visible among airline stocks, as reflected by the 2.2 percent gain posted by the NYSE Arca Airline Index. With the gain, the index climbed further off the nearly three-month closing low that it set on Tuesday.

JetBlue (JBLU) helped lead the airline sector higher, with the discount airline surging up by 5.6 percent after forecasting a 3 to 4 percent increase in first quarter unit revenue.

Utilities stocks also showed a substantial move to the upside, regaining some ground after falling sharply over the past few weeks. The Dow Jones Utilities Averages surged up by 2 percent, bouncing off its worst closing level in almost five months.

Retail, commercial real estate, housing, and pharmaceutical stocks also moved notably higher, while oil service stocks bucked the uptrend amid a decrease by the price of crude oil.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index surged up by 1.4 percent, while Hong Kong's Hang Seng Index rose by 0.3 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index advanced by 0.6 percent, the French CAC 40 Index and the German DAX Index edged down by 0.2 percent and 0.1 percent, respectively.

In the bond market, treasuries pulled back off their best levels after seeing early strength but still closed modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.3 basis points to 2.096 percent.

Looking Ahead

Following today's disappointing retail sales data, trading on Friday may be impacted by the release of reports on producer price inflation and consumer sentiment.

Nonetheless, trading activity may be somewhat subdued as traders look ahead to next week's Federal Reserve meeting.