Stocks Extend Rally On Optimism About Policy Outlook - U.S. Commentary

(RTTNews) - Extending the rally seen in the previous session, stocks moved sharply higher over the course of the trading day on Thursday. The gains on the day further offset the recent pullback by the markets, with the major averages turning positive for the New Year.

The major averages moved roughly sideways going into the close, holding on to substantial gains. The Dow soared 323.35 points or 1.8 percent to 17,907.87, the Nasdaq shot up 85.72 points or 1.8 percent to 4,736.19 and the S&P 500 jumped 36.24 points or 1.8 percent to 2,062.14.

The continued strength on Wall Street partly reflected optimism about the outlook for monetary policy following yesterday's release of the minutes of the latest Federal Reserve meeting.

While the minutes did not offer much new information, they seemed to reassure traders that the Fed will not start raising interest rates before late April.

Remarks from Chicago Fed President Charles Evens suggesting that it could be a "catastrophe" to begin raising rates too early also eased concerns about the outlook for monetary policy.

Positive sentiment was also generated by a letter from European Central Bank President Mario Draghi reiterating his intent to provide further stimulus.

Traders may also have been expressing some optimism about the Labor Department's monthly jobs report due to be released Friday morning.

Economists expect employment to increase by about 245,000 jobs in December after jumping by 321,000 jobs in November.

The unemployment rate is expected to dip to 5.7 percent from 5.8 percent, hitting its lowest level since June of 2008.

Before the start of today's trading, the Labor Department released a report showing a modest drop in initial jobless claims in the week ended January 3rd.

The report said initial jobless claims edged down to 294,000, a decrease of 4,000 from the previous week's unrevised level of 298,000. Economists had expected jobless claims to dip to 290,000.

Sector News

Reflecting another day of broad based buying interest, most of the major sectors showed strong moves to the upside on the day.

Semiconductor stocks turned in some of the market's best performances, driving the Philadelphia Semiconductor Index up by 2.9 percent. The index continued to regain ground after ending Tuesday's trading at its lowest closing level in well over a month.

Within the semiconductor sector, Freescale Semiconductor (FSL), Marvell Technology (MRVL), and Avago Technologies (AVGO) posted standout gains.

Considerable strength was also visible among trucking stocks, as reflected by the 2.8 percent gain posted by the Dow Jones Trucking Index. The gain by the index came after it ended the previous session at a two-month closing low.

Energy, computer hardware, railroad and chemical stocks also saw significant strength, while gold stocks were among the only groups to buck the uptrend amid a modest decrease by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index shot up by 1.7 percent, while Hong Kong's Hang Seng Index advanced by 0.7 percent.

The major European markets showed even more substantial moves to the upside on the day. While the U.K.'s FTSE 100 Index jumped by 2.3 percent, the German DAX Index and the French CAC 40 Index soared by 3.4 percent and 3.6 percent, respectively.

In the bond market, treasuries gave back ground after trending higher over the past several sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 6.2 basis points to 2.016 percent.

Looking Ahead

The Labor Department's monthly jobs report is likely to be in the spotlight on Friday, easily overshadowing a separate report on wholesale trade.