Benchmarks finished in the green despite weak domestic reports after the Bank of Japan announced aggressive policies to improve the health of its economy. The Street received back-to-back discouraging reports on the job market. Following a disappointing report on private sector hiring, initial claims unexpectedly increased in the previous week. This further dampened investor sentiment and limited yesterday’s gains. Now investors will closely watch nonfarm payroll numbers which is scheduled for release on Friday. The utilities sector was the biggest gainer among the S&P 500 industry groups whereas the energy sector was the only loser.
The Dow Jones Industrial Average (DJI) gained 0.4% to close the day at 14,606.11. The S&P 500 added 0.4% to finish yesterday’s trading session at 1,559.98. The tech-laden Nasdaq Composite Index inched up 0.2% to end at 3,224.98. The fear-gauge CBOE Volatility Index (VIX) declined 2.3% to settle at 13.89. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6 billion shares, lower than 2012’s daily average of 6.45 billion shares. Advancing stocks outnumbered the decliners. For the 60% that advanced, 36% declined.
Encouraging news from Japan acted as a catalyst yesterday and overshadowed disappointing reports on the home front. The Bank of Japan took encouraging steps to stimulate growth and battle deflation. Bank of Japan wants to lift inflation to 2% in around two years and increase consumer and business spending. To achieve a inflation rate of 2% the bank has taken certain steps. It will increase purchase of Japanese government bonds at an annual rate of “about 50 trillion yen”.
The Bank will also increase purchase of exchange-traded funds and real-estate investment trusts. Bank of Japan Governor Haruhiko Kuroda said: “The previous approach of incremental easing wasn't enough to pull Japan out of deflation and achieve 2 percent inflation in two years.”
On the domestic front, the U.S. Department of Labor reported initial claims numbers yesterday. According to the report, initial claims increased by 28,000 from the previous week’s unrevised figure of 357,000 to 385,000. This was above the consensus estimate of 349,000. The four week moving average also moved up to 354,250 from prior week’s unrevised figure of 343,000. This development comes a day after a discouraging report on private sector hiring which revealed that hiring was at its slowest in five months in March.
Meanwhile, the European Central Bank (ECB) kept its policy rate unchanged at 0.75%. The ECB has kept its policy rate unchanged for the ninth month in a row. ECB president Mario Draghi said rate cuts in the future may happen if the growth of Euro Zone’s economy fails to pick up. He also said: “We will assess all incoming information in the coming weeks and we stand ready to act.”
Nine out of the ten sectors in the S&P 500 industry groups finished in the green. The utilities sector was the biggest gainer and the Utilities SPDR (XLU) gained 1.0%. Stocks such as Duke Energy Corp (NYSE:DUK), The Southern Company (NYSE:SO), Dominion Resources, Inc. (NYSE:D), NextEra Energy, Inc. (NYSE:NEE) and Exelon Corporation (NYSE:EXC) increased 0.1%, 1.2%, 1.3%, 1.2% and 0.6%, respectively.
The energy sector was the lone loser among the S&P 500 industry groups and the Energy Select Sector SPDR (XLE) lost 0.1%. Stocks such as Exxon Mobil Corporation (NYSE:XOM), Hess Corp. (NYSE:HES), Petroleo Brasileiro Petrobras SA (NYSE:PBR) and ConocoPhillips (NYSE:COP) and Suncor Energy Inc. (NYSE:SU) fell 0.2%, 0.4%, 0.5%, 0.7% and 2.8%, respectively.