Energy, consumer discretionary, industrial sectors lead rally
U.S. stock benchmarks resumed their climb to close at records on Thursday, 11 January 2018, a day after the S&P 500 and Nasdaq suffered the first down day of the year on anxieties about appetite for Treasurys from the world's second-largest economy, China. Investors shrugged off weaker-than-expected jobless claims and wholesale inflation data to chase stocks as the market geared up for the start of fourth-quarter earnings.
The Dow Jones Industrial Average rose 205.60 points, or 0.8%, to 25,574.73. The S&P 500 gained 19.33 points, or 0.7%, to 2,767.56. The tech-heavy Nasdaq Composite index advanced by 58.21 points, or 0.8%, to 7,211.78.
Among the best performers on Wall Street, shares of Xerox rose 5.2%, after The Wall Street Journal reported that the company is in talks to potentially do a major deal with Japan's Fujifilm Holdings Corp.
Eight of eleven sectors advanced with the energy, consumer discretionary, industrials and materials groups being the top performers. The energy sector was up as much as 2.4% thanks to a crude oil rally. Meanwhile, in the industrial sector, heavyweights like Boeing and Caterpillar climbed to new record highs, adding 2.5% and 2.0%, respectively.
Optimism about earnings growth and the potential windfall from lower corporate tax rates have been fueling equity market gains. Investors have also brushed aside a rapid increase in bond yields. China's foreign-exchange regulator on Thursday dismissed a report suggesting Beijing is looking to pare back on U.S. bond buys as fake news. The yield on the 10-year benchmark note was trading at 2.54%. Bond yields move inversely to prices.
Data at Wall Street showed that producer prices declined 0.1% in December (consensus +0.2%) and core producer prices also decreased 0.1% (consensus +0.2%). Year-over-year, producer prices are up 2.6% (down from 3.1% in November) and core producer prices have risen 2.3% (down from 2.4% in November). The key takeaway from the report is that there was a deceleration in the Producer Price Index, which will temper concerns about potential pass-through effects to the consumer and perhaps quell some of the budding inflation concerns that have contributed to some of the weakness in longer-dated Treasury securities to begin the year.
The latest weekly initial jobless claims count totaled 261,000, while the consensus expected a reading of 248,000. Today's tally was above the unrevised prior week count of 250,000. As for continuing claims, they declined to 1.867 million from a revised count of 1.902 million (from 1.914 million). Initial claims have picked up the last few weeks, yet the streak below 300,000 has stretched to 149 straight weeks, serving as a reminder that labor market conditions continue to be favorable.
Bullion prices ended in a mixed mode on Thursday, 11 January 2018 at Comex. Gold prices edged higher on Thursday to settle at a four-month high as the U.S. dollar took a turn lower for the week. Silver prices slipped.
February gold tacked on $3.20, or 0.2%, to settle at $1,322.50 an ounce. Gold futures have climbed roughly 1.1% month to date. March silver SIH8, +0.32% slipped 0.4% to $16.966 an ounce.
The ICE U.S. Dollar Index, a gauge of the greenback against a half-dozen rivalsfell by 0.5% in Thursday trading, poised for a weekly loss of around 0.1%. Because most commodities are priced in dollars, weakness in the currency can provide support for assets like gold, boosting their appeal among buyers using stronger currencies. Conversely, a firmer dollar often prompts weaker gold trading.
Oil prices marked another three-year high on Thursday, 11 January 2018 buoyed by a pullback in U.S. production and eight weeks of declines in domestic crude stockpiles, as traders awaited the Trump administration's decision on whether to extend temporary waivers on sanctions against Iran. Prices for natural gas, meanwhile, saw their highest finish in about six weeks after data showed that supplies of the commodity dropped much more than expected.
On the New York Mercantile Exchange, February West Texas Intermediate crude rose 23 cents, or 0.4%, to settle at $63.80 a barrel, after trading as high as $64.77. March Brent crude LCOH8, +0.13% inched up by 6 cents, or 0.1%, to end at $69.26 a barrel on London's ICE Futures exchange. Prices for both WTI and Brent marked another finish at their highest since early December 2014.
On Friday, investors will receive the Consumer Price Index for December (consensus +0.2%) at 8:30 AM ET, Retail Sales for December (consensus +0.4%) also at 8:30 AM ET, and Business Inventories for November (consensus +0.3%) at 10:00 AM ET. JPMorgan Chase and Wells Fargo will report earnings on Friday morning, unofficially marking the start of the Q4 earnings season.
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