Stocks Close Sharply Higher Amid Drop In Bond Yields - U.S. Commentary

(RTTNews) - Stocks moved sharply higher over the course of the trading day on Thursday after ending the previous session roughly flat. The gains on the day lifted the S&P 500 to a new record closing high, while the Dow reached its best levels since early March.

The major averages ended the day firmly in positive territory, near their highs for the session. The Dow jumped 191.75 points or 1.1 percent to 18,252.24, the Nasdaq soared 69.10 points or 1.4 percent to 5,050.79 and the S&P 500 surged up 22.62 points or 1.1 percent to 2,121.10.

Stocks seemed to benefit from positive sentiment generated by an upward move by treasuries and the subsequent drop in bond yields.

The strength among treasuries came following the release of a report from the Labor Department showing an unexpected drop in U.S. producer prices in the month of April.

The Labor Department said its producer price index for final demand fell by 0.4 percent in April after edging up by 0.2 percent in March. The index had been expected to show another 0.2 percent increase.

Excluding food and energy prices, core producer prices dipped by 0.2 percent in April following a 0.2 percent increase in the previous month. Economists had expected core prices to inch up by 0.1 percent.

Combined with the recent disappointing retail sales data, the drop in prices further reinforces the view that the Federal Reserve will delay its planned increase in interest rates.

Jay Morelock, an economist at FTN Financial, said, "As the Fed continues to signal monetary tightening as the rest of the developed world's central banks remain accommodative, currency movements act as a premature tightening, bringing down inflation before the Fed actually does anything."

"Given recent price data on both a producer and consumer level, the Fed will find it hard to explain its concerns about wage inflation when current price measures remain on a downward trajectory," he added.

Meanwhile, the Labor Department released a separate report showing that first-time claims for U.S. unemployment benefits unexpectedly saw a modest decrease in the week ended May 9th.

The report said initial jobless claims edged down to 264,000, a decrease of 1,000 from the previous week's unrevised level of 265,000. Economists had expected jobless claims to climb to 275,000.

Sector News

Computer hardware stocks saw considerable strength throughout the session, resulting in a 2.3 percent jump by the NYSE Arca Computer Hardware Index. With the gain, the index reached its best closing level in almost a month.

Within the hardware sector, Apple (AAPL) advanced by 2.3 percent after UBS raised its fiscal 2015 earnings estimate for the tech giant amid expectations of an increase in iPhone sales.

Significant strength was also visible among commercial real estate stocks, as reflected by the 2 percent gain posted by the Morgan Stanley REIT Index.

LaSalle Hotel Properties (LHO), Hospitality Properties Trust (HPT), and General Growth Properties (GGP) posted strong gains.

Software stocks also turned in a strong performance on the day, driving the Dow Jones Software Index up by 1.8 percent. Industry giant Microsoft (MSFT) surged up by 2.3 percent.

Housing, tobacco, and internet 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 turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index dropped by 1 percent, while Hong Kong's Hang Seng Index and China's Shanghai Composite Index both crept up by 0.1 percent.

Meanwhile, the major European markets all moved higher on the day. While the U.K.'s FTSE 100 Index rose by 0.3 percent, the French CAC 40 Index and the German DAX Index jumped by 1.4 percent and 1.8 percent, respectively.

As mentioned above, treasuries moved back to the upside after turning lower over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.3 basis points to 2.239 percent.

Looking Ahead

Another batch of economic data may attract attention on Friday, with traders likely to keep an eye on reports on New York manufacturing activity, industrial production, and consumer sentiment.

On the earnings front, Applied Materials (AMAT), Nordstrom (JWN), and Symantec (SYMC) are releasing their quarterly results after the close of today's trading.