U.S. Stocks Extend Rally, Reaching New Record Highs

After fluctuating early in the session, stocks moved mostly higher over the course of the trading day on Thursday, extending a recent rally. With the continued upward move, the major averages all reached new record closing highs.

The major averages all finished the day in positive territory. The Dow climbed 88.92 points or 0.3 percent to 29,379.77, the Nasdaq advanced 63.47 points or 0.7 percent to 9,572.15 and the S&P 500 rose 11.09 points or 0.3 percent to 3,345.78.

The continued strength on Wall Street came on the heels of news that China plans to cut tariffs on approximately $75 billion worth of U.S. goods in half.

A statement from China’s Ministry of Finance said tariffs on some U.S. goods will be cut from to 5 percent from 10 percent, while tariffs on other goods will be lowered to 2.5 percent from 5 percent.

The tariffs reductions, effective on February 14th, will coincide with the U.S. move to halve tariffs on $120 billion worth of Chinese goods as part of the phase one trade deal that was signed last month.

Buying interest was somewhat subdued, however, as some traders seemed reluctant to continuing picking up stocks following the rally seen over the three previous sessions.

Lingering concerns about the coronavirus outbreak also kept some traders on the sidelines along with the upcoming release of the Labor Department’s closely watched monthly jobs report.

Employment is expected to increase by about 160,000 jobs in January after rising by 145,000 jobs in December, while the unemployment rate is expected to hold at 3.5 percent.

A day ahead of the release the monthly jobs report, the Labor Department released a report showing first-time claims for U.S. unemployment benefits fell by much more than expected in the week ended February 1st.

The report said initial jobless claims slid to 202,000, a decrease of 15,000 from the previous week’s revised level of 217,000.

Economists had expected jobless claims to edge down to 215,000 from the 216,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims fell to their lowest level since hitting 193,000 in the week ended April 13, 2019.

A separate report released by the Labor Department showed a notable rebound in labor productivity in the fourth quarter.

The Labor Department said labor productivity jumped by 1.4 percent in the fourth quarter after edging down by 0.2 percent in the third quarter. Economists had expected productivity to surge up by about 1.5 percent.

The report said unit labor costs also shot up by 1.4 percent in the fourth quarter after spiking by 2.5 percent in the previous quarter. The continued increase in labor costs matched economist estimates.

Sector News

Gold stocks showed a strong move to the upside over the course of the session, driving the NYSE Arca Gold Bugs Index up by 1.6 percent.

The strength among gold stocks came amid an increase by the price of the precious metal, as gold for April delivery climbed $7.20 to $1,570 an ounce.

Notable strength also emerged among software and computer hardware stocks, with the Dow Jones U.S. Software Index and the NYSE Arca Computer Hardware Index rising by 1.4 percent and 1.2 percent, respectively.

On the other hand, energy stocks gave back some ground after soaring in the previous session even though the price of crude oil edged higher on the day.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 2.3 percent, the NYSE Arca Natural Gas Index tumbled by 1.8 percent and the NYSE Arca Oil Index slumped by 1.2 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved sharply higher during trading on Thursday. Japan’s Nikkei 225 Index spiked by 2.4 percent, while Hong Kong’s Hang Seng Index soared by 2.6 percent.

The major European markets also moved to the upside on the day. While the U.K.’s FTSE 100 Index rose by 0.3 percent, the German DAX Index and the French CAC 40 Index advanced by 0.7 percent and 0.9 percent, respectively.

In the bond market, treasuries have shown a lack of direction over the course of the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 1.644 percent.

Looking Ahead

Trading on Friday may be driven by reaction to the Labor Department’s closely watched monthly employment report for January.

The jobs report is likely to overshadow separate reports on wholesale inventories and consumer credit, which typically do not have much impact on the markets.

On the earnings front, Activision Blizzard (ATVI), News Corp. (NWSA), Pinterest (PINS), Take-Two (TTWO), and Uber (UBER) are among the companies releasing their quarterly results after the close of today’s trading.

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