U.S. Stocks Extending Upward Move On Optimism About Interest Rate Outlook

After moving notably higher to start the week, stocks have shown another strong move to the upside in morning trading on Thursday. The major averages have all climbed firmly into positive territory, bouncing further off last week’s multi-month lows.

Currently, the major averages are off their highs of the session but still holding onto strong gains. The Dow is up 273.72 points or 0.8 percent at 33,548.30, the Nasdaq is up 140.29 points or 1.1 percent at 13,201.76 and the S&P 500 is up 47.22 points or 1.1 percent at 4,285.08.

The continued strength on Wall Street partly reflects optimism about the outlook for interest rates following the Federal Reserve’s monetary policy announcement on Wednesday.

The Fed left interest rates unchanged for the third time in the past four meetings, leading to optimism that the central bank is done raising interest rates.

Treasury yields moved notably lower on Wednesday and are seeing further downside this morning, adding to the buying interest.

The latest economic data has also added to the optimism about rates, with the Labor Department releasing a report showing an unexpected uptick in first-time claims for U.S. unemployment benefits in the week ended October 28th.

The report said initial jobless claims crept up to 217,000, an increase of 5,000 from the previous week’s revised level of 212,000.

Economists had expected jobless claims to come in unchanged compared to the 210,000 originally reported for the previous week.

A separate report from the Labor Department also showed an unexpected decrease in unit labor costs in the third quarter.

The Labor Department said unit labor costs fell by 0.8 percent in the third quarter after shooting up by a revised 3.2 percent in the second quarter.

Unit labor costs were expected to climb by 0.7 percent compared to the 2.2 percent increase that had been reported for the previous quarter.

“Stocks are rallying as Treasury yields plunge after another soft labor market reading,” said Edward Moya, senior market analyst at OANDA. “If Wall Street sees a soft NFP report tomorrow, you can kiss the chance of one more Fed rate hike this cycle goodbye.”

On Friday, the Labor Department is scheduled to release its closely watched report on employment in the month of October.

Economists currently expected employment to increase by 180,000 jobs in October after surging by 336,000 jobs in September. The unemployment rate is expected to remain at 3.8 percent.

Sector News

Interest rate-sensitive housing stocks are turning in some of the market’s best performances on the day, with the Philadelphia Housing Sector Index surging by 3.2 percent to its best intraday level in over a month.

Substantial strength is also visible among steel stocks, as reflected by the 2.5 percent jump by the NYSE Arca Steel Index. The index has also reached a one-month intraday high.

Transportation stocks are also seeing considerable strength, driving the Dow Jones Transportation Average up by 2.4 percent.

Interest rate-sensitive commercial real estate and utilities stocks have also moved notably higher along with banking, semiconductor and energy stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index jumped by 1.1 percent, while Hong Kong’s Hang Seng Index climbed by 0.8 percent.

The major European markets have also shown strong moves to the upside on the day. While the French CAC 40 Index has surged by 1.9 percent, the German DAX Index is up by 1.6 percent and the U.K.’s FTSE 100 Index is up by 1.2 percent.

In the bond market, treasuries have moved sharply higher, extending the notable advance seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 13.6 basis points at 4.653 percent.

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