Markets gained traction on Thursday after U.S. Treasury Yields declined following the auction of U.S. 30-year bonds. Moreover, Chinese officials denied reports that they were planning to cease purchase of U.S. Treasuries. Further, oil prices surged to a three-year high following a drop in U.S. production and crude inventories. The three- major benchmarks finished at all-time closes with gains buoyed by optimism regarding strong corporate earnings.
The Dow Jones Industrial Average (DJI) increased 0.8% to close at 25,574.73. The S&P 500 rose 0.7% to close at 2,767.56. The tech-laden Nasdaq Composite Index closed at 7,211.78, increasing 0.8%. The fear-gauge CBOE Volatility Index (VIX) decreased 1.4% to close at 9.68. A total of around 6.74 billion shares were traded on Thursday, above the last 20-session average of 6.39 billion shares. Advancers outnumbered decliners on the NYSE by a 3.40-to-1 ratio. On Nasdaq, a 3.18-to-1 ratio favored advancing issues.
China Denies Claims of Ceasing Purchase of US Treasuries
A Bloomberg report stated that top government officials in Beijing have advocated reducing or ceasing the purchase of U.S. Treasuries after reviewing China’s foreign-exchange holdings. Such reports come at a time when central banks across the world have hinted at stepping back from buying bonds.
Citing unknown sources, the report also commented that Chinese officials thought that U.S. bonds had become lackluster. Moreover, prevalent trade tensions between two countries might also result in China pulling back from buying such bonds.
However, a spokesman from State Administration of Foreign Exchange (SAFE), China’s foreign exchange regulator, denied such claims as fake and baseless. The statement also mentioned that China wanted to diversify its holdings which would only guarantee the “overall safety of foreign exchange assets and maintain and increase their value.”
U.S. Treasury Yields Fizzle Out
A firm 30-year bond auction resulted in U.S. Treasury Yields retiring from the highs it hit on Wednesday. The yield on 10-year benchmark note tanked 2 points to hit 2.531%, ending its five-day session of gains.
Further, the yield on 30-year bonds slipped 2.9 basis points to 2.863%. Such a dip was the result of an increase in bond prices. This fall in bond yields meant that market watchers had to shift their focus back to U.S. stocks.
The auction of 30-year bond saw foreign investors and central banks buying as much as 71.5% of the total auction. Such buying ensued after yields hit impressive levels and became more attractive to investors offshore.
How did Benchmarks Fare?
The Dow amassed almost 206 points to hit an all-time closing record on Thursday. The biggest contributor to the blue-chip index’s impressive run in intraday trade was Boeing (BA - Free Report) , shares of which surged 2.5%. Meanwhile, the Nasdaq rose 58.2 points to also hit an all-time high, buoyed by gains for tech-giant Apple (AAPL - Free Report) , shares of which gained 0.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 rose 0.7% to hit a closing record. Such gains were buoyed by a surge in energy shares after crude-oil prices rose to $63 a barrel. Of the 11 major sectors of the S&P 500, eight ended in the positive territory, with energy and consumer discretionary leading the gainers. The Energy Select Sector SPDR ETF (XLE) and the Consumer Discrete Select Sector SPDR ETF (XLY) gained 2% and 1.6%, respectively.
Oil prices rose to hit a three-year high on Thursday following a decrease in U.S. production as well as an eight-week fall in domestic crude inventories. Moreover, market watchers had a keen eye on President Trump’s announcement regarding the future of waiver extensions on sanctions imposed on Iran.
Finally, the small cap heavy Russell 2000 index surged 1.7% to an all-time high of 1,586. Gains for the markets were broad based and fueled by investors’ hopes of strong corporate earnings which would lead to further profits
On the economic data front, initial claims for the week ending Dec 30 increased 261,000, surpassing the consensus estimate of an increase 248,000.
Meanwhile, the Producer Price Index (PPI) for the month December 2017 decreased 0.1%. This was the index’s first decline in 10 months. The figure came in below the consensus estimate of an increase of 0.2%. Further, Core PPI shot up 0.2%, in line with the consensus estimate.
Stocks That Made Headlines
Shaw Communications Q1 Earnings Miss, Revenues Meet
Shaw Communications Inc. (SJR - Free Report) reported mixed first-quarter fiscal 2018 (ended Nov 30, 2017) financial results. (Read More)
Walmart's Dual Revelations: A Curse for Some, a Boon for Many
Wal-Mart Stores, Inc. (WMT - Free Report) hogged limelight yesterday, courtesy of its two recent announcements. (Read More)
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