New ECB Stimulus Contributes To Strength On Wall Street - U.S. Commentary

(RTTNews) - After showing a lack of direction over the past few sessions, stocks showed strong move to the upside over the course of the trading day on Thursday. The gains lifted the Dow and the S&P 500 to new record highs, while the Nasdaq reached its best level in over two months.

The major averages remained firmly positive throughout the afternoon, closing near their best levels of the day. The Dow climbed 98.58 points or 0.6 percent to 16,836.11, the Nasdaq jumped 44.58 points or 1.1 percent to 4,296.23 and the S&P 500 advanced 12.58 points or 0.7 percent to 1,940.46.

The strength on Wall Street partly reflected a positive reaction to new stimulus measures announced by the European Central Bank.

The ECB announced its decision to cut its benchmark interest rate by 10 basis points to 0.15 percent and also lowered its deposit rate to negative 0.1 percent.

Additionally, ECB President Mario Draghi announced a package of additional initiatives to stimulate the economy and said the bank is preparing to start buying asset-backed securities.

Peter Boockvar, managing director at the Lindsey Group, said, "Bottom line, of the realistic moves the ECB could make, Draghi is looking to enact all of them."

"Of what will actually work, it will likely be the ABS purchases, but that market needs to get bigger before the ECB has enough to buy to make it impactful," he added.

Meanwhile, traders largely shrugged off a report from the Labor Department showing a modest rebound in initial jobless claims in the week ended May 31st.

The report said initial jobless claims rose to 312,000, an increase of 8,000 from the previous week's revised level of 304,000. Economists had expected claims to climb to 310,000.

Despite the increase, the Labor Department said the less volatile four-week moving average dipped to 310,250, its lowest level since the week ended June 2, 2007.

Friday morning, the Labor Department is scheduled to release a separate report on the employment situation in the month of May.

Sector News

Networking stocks showed a substantial move to the upside on the day, driving the NYSE Arca Networking Index up by 2.9 percent. The index rebounded after closing lower for four consecutive sessions, reaching a two-month closing high.

Ciena (CIEN) helped lead the sector higher, with the provider of fiber-optic networking equipment surging up by 18.4 percent after reporting better than expected second quarter results and providing upbeat guidance.

Significant strength was also visible among gold stocks, as reflected by the 1.9 percent gain posted by the Philadelphia Gold/Silver Sector Index. The strength in the sector came as gold for August delivery climbed $9 to $1,253.30 an ounce.

Railroad stocks also saw considerable strength on the day, resulting in a 1.5 percent gain by the Dow Jones Railroads Index. With the gain, the index reached a new record closing high.

Commercial real estate, software, defense, and internet stocks also posted strong gains, 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 crept up by 0.1 percent, while Hong Kong's Hang Seng Index dipped by 0.2 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index edged down by 0.1 percent, the German DAX Index rose by 0.2 percent and the French CAC 40 Index surged up by 1.1 percent.

In the bond market, treasuries regained some ground after showing a notable pullback over the past several sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.2 basis points to 2.584 percent.

Looking Ahead

Friday's trading is likely to be driven by reaction to the jobs report, which is expected to show an increase of about 215,000 jobs in May following the addition of 288,000 jobs in April.