Tech Leads Markets Higher After Seesaw Session
After struggling for direction through the first half of the trading day Thursday, Wall Street climbed steadily as rallies in Asia and Europe faded, and focus continued to remain on central bank policy.
The Dow Jones Industrial Average was 77 points higher, or 0.47%, to 16330. The S&P 500 rose 10 points, or 0.52% to 1952, while the Nasdaq Composite gained 39 points, or 0.84% to 4796.
Technology led nine of ten S&P 500 sectors higher on the day, climbing more than 1%.
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Rallies in global equity markets have been short-lived over the last several sessions as traders hunt for discounts, but continue to worry how various monetary policy efforts around the world will shift conversation at next week’s Federal Open Market Committee meeting.
David Madden, IG market analyst, said in a note that the severe selloffs of August are sticking around in the back of Wall Street’s mind – especially with a lack of constant, positive news.
“It is looking increasingly likely that the Fed will keep rates on hold; meanwhile, the eurozone is edging back toward deflation as equity markets remain downbeat. If ultra-low rates in the U.S. and the possibility of extra QE from the ECB can’t encourage buying, then what will?”
The Bank of England announced Thursday morning it held rates and QE unchanged, while minutes showed members saw inflation picking up toward the end of the year.
While many on Wall Street pinned expectations on a September liftoff, forecasts have been revised out to later this year, and in some cases, well into 2016. In a note to clients late Wednesday, Joseph LaVorgna, chief U.S. economist at Deutsche Bank (NYSE:DB), outlined seven reasons he and his team believe the U.S. central bank won’t raise rates in September. Among them, he said global equity markets are still fragile, key FOMC voters seem to be “subtly backing away from a September move,” and inflation continues to hold below the Fed’s 2% target.
“With headline and core inflation consistently below the Fed’s targeted level for over three years, monetary policymakers will have a hard time explaining to the public why they are raising rates,” he wrote.
The house view at Deutche Bank still calls for September, but economists there said exact timing is a “very close call.” Bank of America Merrill Lynch (NYSE:BAC) still expects to see movement this month, while Goldman Sachs (NYSE:GS) has said the Fed will wait until December, and Barclays (NYSE:BCS) has pushed out its expected timeline until March.
“The September liftoff crowd is dropping like flies…recent Fed member comments suggest that they are not close to an agreement for a September hike, but they are still on track to hike this year. We’ll see about that,” Michael Block, chief strategist at Rhino Trading Partners, wrote.
As Wall Street awaits the policy statement expected next Wednesday afternoon, no doubt focus will continue to revolve around economic data. Weekly jobless claims fell to 275,000, in line with expectations, from a downwardly revised 281,000 the week prior.
Meanwhile, the Labor Department reported U.S. import and export prices fell more than expected. Import prices saw a 1.8% decline, the biggest drop in seven months, compared to expectations for a fall of 1.6%. Export prices, meanwhile, declined 1.4%, compared to views for a 0.3% slide.
European markets gave up gains after the start of the session, following Asia equities that were lower. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, declined 1.51%. The German Dax fell 1.01%, while the French CAC 40 was 1.48% lower, and the UK’s FTSE 100 shed 1.39%.
Over in Asia, China’s Shanghai Composite fell 1.39%, while Hong Kong’s Hang Seng lost 2.57%, and Japan’s Nikkei declined 1.76%.
In commodities, global crude prices bounced back from the prior session’s losses digested the latest inventory data from the EIA, which showed a build of 2.6 million barrels. U.S. crude prices rose 4.01% to $45.92 a barrel, while Brent, the international benchmark, added 2.75%to $48.89.
The energy sector rose on the heels of the data, popping 0.57% in recent trade.
Metals also traded in positive territory. Gold rose 0.66% to $1,109 a troy ounce, while silver traded up 0.45% to $14.63 an ounce. Copper gained 0.49% to $2.45 a pound.
The dollar was mixed against a handful of global currencies, while the euro rose 0.66% against the greenback. Meanwhile, the yield on the 10-year U.S. Treasury bond rose 0.039 percentage point to 2.220%.