The S&P 500 rose 1.2% on Thursday, extending its rebound rally to a third straight day. The Dow Jones Industrial Average (+1.2%) and Nasdaq Composite (+1.3%) kept pace with the benchmark index while the Russell 2000 (+1.7%) pulled ahead of its large-cap peers.
All 11 S&P 500 sectors closed in positive territory with gains ranging from 0.5% (utilities) to 3.5% (energy). Advancing issues outpaced declining issues by roughly a 4:1 margin at the NYSE and a 3:1 margin at the Nasdaq.
Strikingly, the stock market was undeterred by an 8% rebound in oil prices ($103.43, +8.01, +8.4%), which was catalyzed by Russia refuting yesterday’s reports that described progress in peace talks with Ukraine. Western officials believe that both sides remain far apart on those talks, according to Reuters.
The market, to be fair, did get off to a slow start despite an encouraging round of economic data, including housing starts for February, weekly initial jobless claims, and the Philadelphia Fed Index for March.
Stocks appeared to key off the price action in the 10-yr Treasury note yield, which settled unchanged at 2.19% after dipping below 2.11% overnight. The ability for the 10-yr yield to move higher, undoing some of yesterday’s curve-flattening activity, seemed to alleviate some underlying growth concerns.
The 2-yr yield fell four basis points to 1.94%. The U.S. Dollar Index fell 0.7% to 97.97 amid relative strength in the euro, which rose 0.7% against the dollar to 1.1112. The British pound (unch), meanwhile, moved lower in the wake of the Bank of England’s decision to hike its key lending rate by 25 basis points to 0.75%.
Whether or not it was the Treasury market that got things going for equities, there was little doubt that positive momentum, which was borne out of a bearish sentiment, was on the market’s side.
With today’s advance, the S&P 500 finished 5.7% above Monday’s close, versus 8.2% and 6.4% gains in the Nasdaq Composite and Russell 2000, respectively. Over the same three-day period, the CBOE Volatility Index (25.67, -1.00, -3.8%) has dropped 19%.
Reviewing Thursday’s economic data:
- February housing starts increased 6.8% month-over-month to a seasonally adjusted annual rate of 1.769 million (Briefing.com consensus 1.700 million) and building permits slipped 1.9% to a seasonally adjusted annual rate of 1.859 million (Briefing.com consensus 1.860 million).
- The key takeaway from the report was that single-family units (+5.7%) drove the strength in starts, yet a 0.5% decline in permits for single units (a leading indicator) tempered some of the enthusiasm for the otherwise encouraging February number.
- Initial jobless claims for the week ending March 12 decreased by 15,000 to 214,000 (Briefing.com consensus 224,000) and continuing claims for the week ending March 5 decreased by 71,000 to 1.419 million, hitting their lowest level since February 21, 1970.
- The key takeaway from the report is the understanding that the latest week is the week in which the survey for the March employment report was conducted. With the low level of initial claims, expectations for a strong pickup in job growth – and a continuation of the strong labor market the Fed chair was discussing – will remain high.
- Total industrial production increased 0.5% month-over-month in February (Briefing.com consensus 0.5%) following an unrevised 1.4% increase in January. The capacity utilization rate rose to 77.6% (Briefing.com consensus 77.9%) from a downwardly revised 77.3% (from 77.6%) in January.
- The key takeaway from the report is that industrial production is being held back by the output of motor vehicles and parts, which stems from ongoing supply shortages. The output of motor vehicles and parts declined 3.5% in February.
- The Philadelphia Fed Index for March increased to 27.4 (Briefing.com consensus 14.0) from 16.0 in February.
Looking ahead, investors will receive Existing Home Sales for February on Friday.
- Dow Jones Industrial Average -5.1% YTD
- S&P 500 -7.4% YTD
- Russell 2000 -8.0% YTD
- Nasdaq Composite -13.0% YTD
Overseas:
- Europe: DAX -0.4%, FTSE +1.3%, CAC +0.4%
- Asia: Nikkei +3.5%, Hang Seng +7.0%, Shanghai +1.4%
Commodities:
- Crude Oil +8.01 @ 103.43
- Nat Gas +0.21 @ 5.01
- Gold +32.00 @ 1941.40
- Silver +0.76 @ 25.44
- Copper +0.11 @ 4.71