Stocks See Further Upside After Yesterday's Rally - U.S. Commentary

(RTTNews) - After moving sharply higher over the course of the previous session, stocks saw some further upside during trading on Thursday. While buying interest was somewhat subdued, the Nasdaq still managed to reach its best closing level in a month.

The major averages ended the day in positive territory but off their highs for the session. The Nasdaq rose 22.80 points or 0.6 percent to 4,154.34, while the Dow inched up 10.02 points or 0.1 percent to 16,543.08 and the S&P 500 edged up 4.46 points or 0.2 percent to 1,892.49.

The continued strength on Wall Street came as the U.S. economic calendar finally picked up following several quiet days.

Some positive sentiment was generated by the release of a report from the National Association of Realtors showing that existing home sales rose for the first time this year in April.

NAR said existing home sales rose 1.3 percent to a seasonally adjusted annual rate of 4.65 million in April from 4.59 million in March.

Additionally, financial data firm Markit released a report showing that its preliminary reading on manufacturing activity in May rose by more than expected.

The report showed that Markit's Manufacturing Purchasing Managers Index rose to 56.2 in May from 55.4 in April, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 55.9.

On the other hand, a report from the Labor Department showing that initial jobless claims rebounded by more than expected in the week ended May 17th helped to limit the upside for the markets.

The Labor Department said jobless claims jumped to 326,000, an increase of 28,000 from the previous week's revised level of 298,000. Economists had been expecting jobless claims to climb to 310,000.

While the number for the previous week was upwardly revised from 297,000, it still represents the lowest number of claims in seven years.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "Last week's below 300,000 print turned out to be a one week wonder but the recent trend is encouraging in terms of the pace of firing's."

Among individual stocks, shares of Williams-Sonoma (WSM) moved sharply higher on the day after the home products retailer reported better than expected first quarter results and raised its full-year guidance.

Discount retailer Dollar Tree (TREE) also turned in a particularly strong performance after raising its outlook for full-year earnings.

On the other hand, shares of Patterson Companies (PDCO) moved to the downside after the dental, veterinary, and rehabilitation supplies distributor reported weaker than expected fourth quarter results.

Sector News

Biotechnology stocks saw considerable strength on the day, driving the NYSE Arca Biotechnology Index up by 1.5 percent. Despite the gain, the index remained stuck in a recent trading range.

Nektar Therapeutics (NKTR) and Vertex (VRTX) turned in two of the biotech sector's best performances, with both jumping by 6 percent.

Significant strength was also visible among housing stocks, which reacted positively to the existing home sales data. Reflecting the strength in the sector, the Philadelphia Housing Sector Index rose by 1.2 percent.

Electronic storage, brokerage, and airline stocks also saw notable strength, while most of the other major sectors ended the day showing more modest moves.

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 2.1 percent, while Hong Kong's Hang Seng Index ended the day up by 0.5 percent.

Meanwhile, the major European markets ended the day mixed. While the U.K.'s FTSE 100 Index closed just below the unchanged line, the French CAC 40 Index and the German DAX Index both rose by 0.2 percent.

In the bond market, treasuries saw modest weakness on the day, extending the downward move seen on Wednesday. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.8 basis points to 2.555 percent.

Looking Ahead

Trading on Friday may be impacted by reaction to earnings news from Hewlett-Packard (HPQ) and Gap (GPS), which are among the companies releasing their quarterly results after the close of today's trading.

The Commerce Department's report on new home sales may also be in focus, although trading activity is likely to be somewhat subdued ahead of the long weekend.