Upbeat Economic Data Leads To Rally On Wall Street - U.S. Commentary

(RTTNews) - After moving sharply higher in early trading, stocks continued to perform well throughout the session on Thursday. The strong gains on the day lifted the Dow and the S&P 500 to new record closing highs, with the S&P 500 closing above 1,700 for the first time.

The major averages held on to strong gains going to the close, finishing the session near their best levels of the day. The Dow jumped 128.48 points or 0.8 percent to 15,628.02, the Nasdaq soared 49.37 points or 1.4 percent to 3,675.74 and the S&P 500 surged up 21.14 points or 1.3 percent to 1,706.87.

The strength on Wall Street came following the release of upbeat economic data from around the globe, including better than expected readings on manufacturing in China and Europe.

In U.S. economic news, the Labor Department released a report showing that initial jobless claims unexpectedly fell to a five-year low in the week ended July 27th.

The report said initial jobless claims fell to 326,000, a decrease of 19,000 from the previous week's revised figure of 345,000. The drop surprised economists, who had expected jobless claims to edge up to 345,000 from the 343,000 originally reported for the previous week.

With the unexpected decrease, initial jobless claims fell to their lowest level since hitting 321,000 in the week ended January 19, 2008.

The data generated some optimism ahead of Friday's monthly jobs report, which could have a significant impact on the economic outlook.

A separate report from the Institute for Supply Management showed a bigger than expected increase by its index of U.S. manufacturing activity, which reached a two-year high.

The ISM said its purchasing managers index surged up 55.4 in July from 50.9 in June, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to climb to a reading of 53.1.

With the much bigger than expected increase, the ISM's manufacturing index rose to its highest level since reaching 55.8 in June of 2011.

Meanwhile, traders largely shrugged off a report from the Commerce Department showing an unexpected drop in construction spending in June.

Sector News

Trucking stocks posted particularly strong gains on the day, turning in some of the market's best performances. The Dow Jones Trucking Index surged up by 3.8 percent to a record closing high.

Con-way (CNW) helped to lead the trucking sector higher, jumping by 10.5 percent after reporting better than expected second quarter earnings.

Significant strength also emerged among biotechnology stocks, as reflected by the 2.1 percent gain posted by the NYSE Arca Biotechnology Index. Affymetrix (AFFX), Nektar Therapeutics (NKTR) and Incyte (INCY) posted standout gains.

Brokerage stocks also saw considerable strength on the day, with the NYSE Arca Broker/Dealer Index rising by 2 percent. With the gain, the index reached its best closing level in almost five years.

Railroad, defense, natural gas, and banking, stocks also posted strong gains, moving higher along with most of the other major sectors.

Meanwhile, gold stocks came under pressure over the course of the session, dragging the NYSE Arca Gold Bugs Index down by 3.3 percent.

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 2.5 percent, while Hong Kong's Hang Seng Index advanced by 0.9 percent.

The major European markets also showed notable moves to the upside on the day. While the U.K.'s FTSE 100 Index rose by 0.9 percent, the French CAC 40 Index and the German DAX Index jumped by 1.3 percent and 1.6 percent, respectively.

In the bond market, treasuries moved sharply lower on the heels of the largely upbeat economic data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 13 basis points to a nearly two-year closing high of 2.723 percent.

Looking Ahead

Trading on Friday is likely to be driven by reaction to the Labor Department's monthly job report, which is expected to show an increase of about 175,000 jobs in July.

The closely watched monthly jobs report is likely to overshadow two separate reports on personal income and spending and factory orders.