Encouraging Inflation Data Leads To Rally On Wall Street

(RTTNews) - Following the extreme volatility seen during Wednesday's session, stocks moved sharply higher over the course of the trading day on Thursday. With the strong upward move, the Dow and the S&P 500 reached their best closing levels in nearly two months.

The major averages pulled back off their best levels going into the close but still posted significant gains. The Dow jumped 383.19 points or 1.1 percent to 34,029.69, the Nasdaq spiked 236.93 points or 2.0 percent to 12,166.27 and the S&P 500 surged 54.27 points or 1.3 percent to 4,146.22.

The rally on Wall Street came following a report from the Labor Department showing an unexpected decrease in U.S. producer prices in the month of March.

The Labor Department said its producer price index for final demand fell by 0.5 percent in March following a revised unchanged reading in February.

Economists had expected producer prices to come in unchanged compared to the 0.1 percent dip originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed dramatically to 2.7 percent in March from 4.9 percent in February. Economists had expected the pace of growth to slow to 3.0 percent.

Combined with Wednesday's tamer-than-expected consumer price inflation data, the report helped ease concerns about inflation and the outlook for interest rates.

"The link between the PPI and CPI is not as clear as it once was, but persistently small increases — or, as in March, an outright decline — will eventually come through to consumers if demand slows enough to prevent companies from taking out the slack in the form of higher margins," said Chris Low, chief economist at FHN Financial.

He added, "For a Fed already inclined to pause, this report tips the scale just a bit more in favor, especially after yesterday's CPI failed to reveal any new inflationary problems."

However, CME Group's FedWatch Tool is currently still indicating a 67.9 percent chance the Fed will raise rates by a quarter point next month compared to a 32.1 percent chance rates will be left unchanged.

A separate Labor Department report showed first-time claims for U.S. unemployment benefits rose by more than expected in the week ended April 8th.

The report said initial jobless claims climbed to 239,000, an increase of 11,000 from the previous week's unrevised level of 228,000. Economists had expected jobless claims to rise to 232,000.

Sector News

Gold stocks saw substantial strength on the day, driving the NYSE Arca Gold Bugs Index up by 2.6 percent to an eleven-month closing high.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for June delivery surging $30.40 to $2,055.30 an ounce.

Considerable strength was also visible among telecom stocks, as reflected by the 2.2 surge by the NYSE Arca North American Telecom Index. The index reached its best closing level in well over a month.

Retail stocks also showed a significant move to the upside on the day, resulting in a 2.2 percent jump by the NYSE Arca Biotechnology Index.

Software, biotechnology and brokerage stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

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 rose by 0.3 percent, while China's Shanghai Composite Index dipped by 0.3 percent.

Meanwhile, the major European markets all moved to the upside over the course of the session. While the French CAC 40 Index jumped by 1.1 percent, the U.K.'s FTSE 100 Index and the German DAX Index both edged up by 0.2 percent.

In the bond market, treasuries showed a significant downturn after seeing early strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.1 basis points to 3.452 percent after hitting a low of 3.372 percent.

Looking Ahead

A slew of U.S. economic data is scheduled to be released on Friday, including reports on retail sales, industrial production, import and export prices and consumer sentiment.

Earnings news may also attract attention, with financial giants Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) due to report their quarterly results before the start of trading on Friday.