Stocks Reach New Record Highs After ECB Announcement - U.S. Commentary

(RTTNews) - Following the rally seen in the previous session, stocks saw some further upside during trading on Thursday. With the continued strength on Wall Street, all three of the major averages reached new record closing highs.

The major averages closed in positive territory but off their best levels of the day. The Dow rose 65.19 points or 0.3 percent to 19,614.81, the Nasdaq climbed 23.59 points or 0.4 percent to 5,417.36 and the S&P 500 edged up 4.84 points or 0.2 percent to 2,246.19.

The higher close on Wall Street came on the heels of the European Central Bank's highly anticipated monetary policy announcement.

While the ECB said its asset purchase program is being extended longer than anticipated, the bank also said it will slow the pace of purchases.

The ECB said it decided to continue its asset purchases at the current monthly pace of 80 billion euros until the end of March of 2017.

From April of 2017, the asset purchases are intended to continue at a monthly pace of 60 billion euros until the end of December 2017, or beyond, if necessary

In his subsequent press conference, ECB President Mario Draghi argued the reduction does not qualify as "tapering" and said the option of scaling back bond purchases to zero was not discussed by policymakers

Draghi stressed that the asset purchases could be expanded or extended if the economic outlook worsens in the future.

"Presumably, the Bank has been encouraged by signs that the economy is performing well in the face of political uncertainty at home and abroad," said Jennifer McKeown, Chief European Economist at Capital Economics. "However, it clearly remains in cautious mode."

On the U.S. economic front, the Labor Department released a report showing that initial jobless claims pulled back in the week ended December 3rd after reaching a five-month high in the previous week.

The report said initial jobless claims fell to 258,000, a decrease of 10,000 from the previous week's unrevised level of 268,000. The drop in jobless claims matched economist estimates.

Sector News

Oil service stocks showed a strong move to the upside over the course of the session, driving the Philadelphia Oil Service Index up by 2.4 percent. With the gain, the index reached its best closing level in a year.

The strength among oil service stocks came amid a notable increase by the price of crude oil, with crude for January delivery jumping $1.07 to $50.84 a barrel.

Significant strength was also visible among networking stocks, as reflected by the 2.4 percent gain posted by the NYSE Arca Networking Index. The index jumped to a fifteen-year closing high.

Ciena (CIEN) led the networking sector higher, surging up by 15.1 percent after reporting weaker than expected fourth quarter earnings but saying its order backlog is the highest ever.

Tobacco, financial, and housing stocks also moved notably higher, while most of the other major sectors showed more modest moves.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index surged up by 1.5 percent, while Hong Kong's Hang Seng Index rose by 0.3 percent.

The major European markets also moved to the upside following the ECB announcement. While the German DAX Index jumped by 1.8 percent, the French CAC 40 Index advanced by 0.9 percent and the U.K.'s FTSE 100 Index climbed by 0.4 percent.

In the bond market, treasuries pulled back after moving notably higher in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4 basis points to 2.387 percent.

Looking Ahead

While reports on consumer sentiment and wholesale inventories are due to be released on Friday, traders may be reluctant to make significant moves ahead of next week's Federal Reserve meeting.