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Benchmarks scored record highs yet again on Thursday, banking on encouraging June’s nonfarm payroll numbers. Investors were also encouraged by a drop in the unemployment rate. Unemployment dropped to its lowest level in almost six years. The blue-chip index and the S&P 500 closed at a record level for the third straight day. The Dow closed above the 17,000 mark for the first time on Thursday. Benchmarks also ended in the positive territory for the holiday-shortened week. For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) gained 0.5% to close Thursday’s trading session at 17,068.26. The Standard & Poor 500 (S&P 500) advanced almost 0.6% to finish at 1,985.44. The tech-laden Nasdaq Composite Index closed at 4,485.93; gaining 0.6%. The fear-gauge CBOE Volatility Index (VIX) dropped 4.6% to settle at 10.32 Total volume on the New York Stock Exchange (NYSE) was about 1.99 billion. Advancers outpaced declining stocks on the NYSE. For 55% stocks that advanced, 41% declined.
Trading session closed at 1 p.m. ET on Thursday ahead of the Independence Day holiday on July 4. The blue-chip index ended at a record level for the fourteenth time this year. The S&P 500 ended at another high; the twenty-fifth one this year.
Investor sentiment turned bullish after the U.S. Bureau of Labor Statistics said total nonfarm payroll employment jumped 288,000 in June, more than the consensus estimate of a rise by 213,000. Nonfarm payroll jobs increased over the 200,000 level for the fifth straight month in June, a stretch last seen in 1999.
Investors also focused on data that showed unemployment rate dropped to 6.1%, touching the lowest level since September 2008. Employment increased in nearly every major industry, led by professional services, retail, restaurants, health care, finance and manufacturing.
However, a separate report noted that initial claims have gone up. The U.S Department of Labor reported that seasonally adjusted initial claims increased 2,000 to 315,000 in the week ending June 28. This rise in application for unemployment benefits was more than the consensus estimate of an increase to 314,000.
Separately, the Institute for Supply Management reported its Non-Manufacturing Index for June has decreased 0.3 percentage points to 56.0% from May’s reading of 56.3%. On the other hand, the New Orders Index had increased 0.7 percentage points to 61.2% in June from May’s reading of 60.5%. The ISM Employment gauge also increased 2.0 percentage points to 54.4% in June from May’s reading of 52.4%.
Separately, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, reported that goods and services deficit had decreased to $44.4 billion in May from $47.0 billion in April. Exports in May increased $2.0 billion to $195.5 billion, while imports decreased $0.7 billion to $239.8 billion.
Among individual stocks, PetSmart, Inc. (NASDAQ:PETM) gained the most among the S&P 500 components. Shares of the retailer of pet products surged 12.5% after the company declared that hedge fund Jana Partners had acquired a 9.9% stake in the company. Shares of the company also hit a near three-month high of $69 per share during the intraday trading.
Airline stocks bounced back from Wednesday’s losses and finished in the green on Thursday. Shares of U.S. airline companies such as Delta Air Lines Inc. (NYSE:DAL), United Continental Holdings, Inc. (NYSE:UAL) and The Boeing Company (NYSE:BA) gained 0.9%, 1.6%, and 0.7%, respectively.
Nine out of 10 sectors of the S&P 500 ended in the green. The SPDR S&P Homebuilders (XHB) gained 0.9%, the highest among the S&P 500 sectors. Key housing stocks from the sector such as DR Horton Inc. (NYSE:DHI), Toll Brothers Inc. (NYSE:TOL) and PulteGroup, Inc. (NYSE:PHM) increased 0.6%, 0.4% and 0.1%, respectively.
The Industrial Select Sector SPDR (XLI) advanced 1.0%, the second highest among the S&P 500 sectors. Key stocks from the industrial sector such as General Electric Company (NYSE:GE), United Technologies Corp. (NYSE:UTX), Union Pacific Corporation (NYSE:UNP) and 3M Company (NYSE:MMM) increased 0.9%, 0.3%, 0.9% and 0.1%, respectively.
Benchmarks also ended in the green in the holiday-shortened week. The S&P 500, the Dow and the Nasdaq gained 1.2%, 0.7% and 2.7%, respectively, over the week.
Benchmarks notched up gains for the week after economic data showed manufacturing activity picked up in U.S and Asia. The Institute for Supply management reported June PMI of 55.3%, indicating expansion in factory output for the 13th successive month. Any reading above 50 suggests expansion. Manufacturing activity also picked up in Asia. China's final reading of the HSBC/Markit purchasing managers' index (PMI) rose to 50.7 in June. Moreover, Japan’s manufacturing activity also expanded in June.
Gains in health-care, technology and consumer discretionary sectors also propelled the S&P 500 and the Dow to close at record highs. The Nasdaq was primarily boosted by bio-tech stocks.
Upbeat U.S. auto sales in June also boosted investor sentiment. Domestic-made vehicle sales climbed to an annualized rate of 13.5 million in June. Total vehicle sales also increased to an annualized rate of 17.0 million in June. U.S. car and light truck sales reached the highest level in more than eight years.
However, upbeat private sector hiring numbers hardly impacted the markets. Among other economic data, a gauge of pending home sales numbers hit its highest level in eight months in May and data from the Institute for Supply Management showed Chicago PMI numbers dropped more than expected.
Meanwhile, investors also remained focused on Federal Reserve Chairwoman Janet Yellen’s comments. On Wednesday, at the International Monetary Fund in Washington, Yellen said: “Monetary policy faces significant limitations as a tool to promote financial stability”. However, she stated that concerns over financial stability shouldn’t lead to a change in current monetary policy.