BoE Decision Leads To Choppy Trading Ahead Of Jobs Report - U.S. Commentary

(RTTNews) - With traders digesting the Bank of England's highly anticipated monetary policy decision, stocks showed a lack of direction throughout the trading day on Wall Street. The major averages spent the day bouncing back and forth across the unchanged line.

At the close of trading, the major averages were on opposite sides of the unchanged line. While the Dow edged down 2.95 points or less than 0.1 percent to 18,352.05, the Nasdaq crept up 6.51 points or 0.1 percent to 5,166.25 and the S&P 500 inched up 0.46 points or less than 0.1 percent to 2,164.25.

The choppy trading on Wall Street came following the Bank of England's announcement of its decision to reduce interest rates following Britain's vote to leave the European Union.

The BoE revealed that its Monetary Policy Committee voted unanimously to lower interest rates by 25 basis points to a record low 0.25 percent, marking the first rate cut in over seven years.

Noting that the exchange rate has fallen and the outlook for growth in the short to medium term has weakened markedly, the central bank also indicated that it could lower rates further.

The bank also introduced a package of measures designed to provide additional monetary stimulus, including a scheme to reinforce the pass-through of the rate cut.

In his subsequent press conference, BoE Governor Mark Carney said banks have "no excuse" not to pass on lower borrowing costs to customers.

Additionally, the BoE said it would purchase up to 10 billion pounds worth of corporate bonds and 60 billion pounds worth of U.K. government bonds.

The central bank also slashed its forecast for U.K. economic growth, saying it now expects the economy to grow by 0.8 just percent in 2017 compared to its previous forecast for 2.3 percent growth.

With the BoE decision now in the rear-view mirror, traders were also looking ahead to the Labor Department's monthly jobs report due to be released on Friday.

The report is expected to show an increase of about 185,000 jobs in July after employment jumped by 287,000 jobs in June. The unemployment rate is expected to edge down to 4.8 percent from 4.9 percent.

The Labor Department released a report before the start of trading showing an unexpected uptick in initial jobless claims in the week ended July 30th.

The report said initial jobless claims rose to 269,000, an increase of 3,000 from the previous week's unrevised level of 266,000. Economists had expected claims to edge down to 265,000.

A separate report from the Commerce Department showed that factory orders slumped by 1.5 percent in June compared to economist estimates for a 1.8 percent drop.

Sector News

Despite the lack of direction shown by the broader markets, airline stocks saw considerable strength on the day. Reflecting the strength in the sector, the NYSE Arca Airline Index surged up by 2.3 percent.

Copa Airlines parent Copa Holdings (CPA) posted a standout gain, jumping by 16.5 percent after reporting better than expected second quarter earnings.

Significant strength was also visible among gold stocks, as reflected by the 1.4 percent gain posted by the NYSE Arca Gold Bugs Index. With the gain, the index reached a new three-year closing high.

The strength in the gold sector came amid a modest increase by the price of the precious metal, with gold for December delivery rising $2.50 to $1,362.70 an ounce.

On the other hand, biotechnology stocks came under pressure, dragging the NYSE Arca Biotechnology Index down by 1.1 percent. The drop by the index came after it ended the previous session at a nearly seven-month closing high.

Intercept Pharmaceuticals (ICPT) and Agios Pharmaceuticals (AGIO) turned in two of the biotech sector's worst performances on the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved to the upside during trading on Thursday. Japan's Nikkei 225 Index surged up by 1.1 percent, while Hong Kong's Hang Seng Index climbed by 0.4 percent.

The major European markets also moved higher on the day. While the U.K.'s FTSE 100 Index jumped by 1.6 percent, the French CAC 40 Index and the German DAX Index both advanced by 0.6 percent.

In the bond market, treasuries ended the day firmly positive on the heels of the BoE decision. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.9 basis points to 1.503 percent.

Looking Ahead

The monthly U.S. jobs report is likely to be in focus on Friday, overshadowing reports on international trade and consumer credit.

Meanwhile, Activision Blizzard (ATVI), Con Edison (ED), Kraft Heinz (KHC), News Corp. (NWS), Take-Two (TTWO), and Weight Watchers (WTW) are among the companies releasing their quarterly results after the close of today's trading.