US close: Markets higher as investors pore over Fed minutes
US stocks finished higher on Thursday after better-than-expected employment data, while investors were also digesting news that the Federal Reserve will start unwinding its $4.5trn balance sheet this year.
Dow Jones I.A.
39,872.99
04:30 15/10/20
Nasdaq 100
18,713.80
12:15 21/05/24
The Dow Jones Industrial Average closed up 0.07% to 20,662.95, the S&P 500 rose 0.19% to 2,357.49, and the Nasdaq added 0.04% to 5,420.88.
Stocks were buoyed as data showed that number of Americans filing for unemployment fell more than expected last week, ahead of Friday’s non-farm payrolls.
US initial jobless claims were down 25,000 to 234,000 from the previous week's level, which was revised up by 1,000 to 259,000.
The four-week moving average came in at 250,000, down 4,500 from the previous week's average, which was revised up to 254,500 from 254,250.
Michael Hewson, chief market analyst at CMC Markets said that the sharp drop in initial jobless claims "appear to suggest a tightening labour market, but does contrast with yesterday’s bumper ADP numbers, which suggested that there still remains a significant amount of slack in the US labour market".
Investors were also still mulling Wednesday’s Federal Reserve minutes, which revealed that the central bank was ready to start cutting its balance sheet before the end of the year.
The minutes from the March meeting, during which officials approved a quarter-point interest rate hike, revealed that the Fed plans to start shedding the $4.5trn in bonds it is holding on its balance sheet.
They stated that the reductions should be “gradual and predictable” through the “phasing out” of reinvestments, meaning the Fed won't just stop repurchasing all debt instruments when they mature.
Russ Mould, investment director at AJ Bell, said that any such move to reduce the size of the balance sheet and ‘sterilise’ quantitative easing will be seen by some as the ultimate sign of the bond-buying scheme’s success – namely that the US economy is back on track a decade after the first signs of sub-prime mortgage distress became clear and is capable of functioning without emergency support.
“The FOMC minutes offer no promises of sterilisation and stress that any move to withdraw this stimulus would be made gradually, mirroring the baby steps made under Janet Yellen to tighten monetary policy via three interest rate increases so far (since December 2015) and the decision to stop adding to quantitative easing in 2014.
"The battle lines are now drawn between bulls, looking forward to a healed US economy and one fired up by the proposed Trump reform programme, and bears pointing toward historically very high valuations on a market-cap-to-GDP and cyclically-adjusted price earnings (CAPE or Shiller PE) basis, moderate corporate profit momentum and the withdrawal of quantitative easing as key obstacles toward fresh advances in US stocks."
Elsewhere, European Central Bank president Mario Draghi was moved to dispel rumours that there will be and to negative interest rates and that it will be raised this autumn.
The minutes of the ECB’s March were meeting were also released on Thursday and showed that the central bank was facing pressures from the heads of the French, German, Spanish and Dutch central banks over its assessment of the Eurozone economy.
Back in the US, investors were also eyeing the meeting of President Donald Trump and his Chinese counterpart at Trump’s Mar-a-Lago resort in Florida.
At the two-day summit the world leaders are expected to discuss trade and reigning North Korea’s nuclear ambitions.
In corporate news, retailers rallied after recent sell-offs with L Brands climbing 11.02%, Bed Bath & Beyond rising 3.39%, Staples up 0.61%, and Kohl’s Corp 5.55% higher.
Sunoco surged 20.24% after 7-Eleven owner Seven & I Holdings said it would buy over 1,000 stores and petrol stations from the oil company for $3.3bn.
Constellation Brands gained 6.43% after the drinks company reported strong fourth quarter earnings due to whiskey sales.
Dow Jones - Risers
Caterpillar Inc. (CAT) $95.82 1.68%
Chevron Corp. (CVX) $109.29 0.60%
Exxon Mobil Corp. (XOM) $83.01 0.58%
Goldman Sachs Group Inc. (GS) $228.64 0.43%
Home Depot Inc. (HD) $147.24 0.41%
JP Morgan Chase & Co. (JPM) $86.48 0.34%
Nike Inc. (NKE) $55.14 0.29%
Microsoft Corp. (MSFT) $65.73 0.26%
Cisco Systems Inc. (CSCO) $33.08 0.24%
Coca-Cola Co. (KO) $42.67 0.23%
Dow Jones - Fallers
Verizon Communications Inc. (VZ) $48.43 -1.20%
Procter & Gamble Co. (PG) $89.40 -0.63%
Intel Corp. (INTC) $36.03 -0.52%
Merck & Co. Inc. (MRK) $63.24 -0.52%
Wal-Mart Stores Inc. (WMT) $71.43 -0.31%
Travelers Company Inc. (TRV) $120.54 -0.31%
Apple Inc. (AAPL) $143.66 -0.25%
International Business Machines Corp. (IBM) $172.45 -0.25%
Pfizer Inc. (PFE) $34.11 -0.23%
McDonald's Corp. (MCD) $130.15 -0.20%
S&P 500 - Risers
L Brands Inc (LB) $47.85 11.02%
Constellation Brands Inc. Class A (STZ) $171.77 6.43%
Kohls Corp. (KSS) $39.59 5.55%
Gap Inc. (GPS) $24.05 5.02%
Bed Bath & Beyond Inc. (BBBY) $39.08 3.39%
Under Armour Inc. Class A (UAA) $20.27 3.31%
Devon Energy Corp. (DVN) $42.88 3.28%
Endo International Plc (ENDP) $11.27 3.02%
CF Industries Holdings Inc. (CF) $29.66 2.99%
Nordstrom Inc. (JWN) $44.72 2.95%
S&P 500 - Fallers
AT&T Inc. (T) $40.60 -2.19%
Fastenal Co. (FAST) $50.95 -1.47%
Amazon.Com Inc. (AMZN) $898.28 -1.21%
Verizon Communications Inc. (VZ) $48.43 -1.20%
Coca-Cola European Partners Limited (CCE) $37.10 -1.04%
Estee Lauder Co. Inc. (EL) $84.37 -1.02%
Clorox Co. (CLX) $132.95 -0.98%
General Mills Inc. (GIS) $57.69 -0.96%
Frontier Communications Co. (FTR) $2.10 -0.94%
Twenty-First Century Fox Inc Class B (FOX) $30.55 -0.91%
Nasdaq 100 - Risers
JD.com, Inc. (JD) $32.23 2.22%
Comcast Corp. (CMCSA) $38.13 2.12%
Tractor Supply Company (TSCO) $69.53 1.88%
Costco Wholesale Corp. (COST) $170.02 1.81%
Illumina Inc. (ILMN) $170.44 1.77%
Dentsply International Inc. (XRAY) $63.04 1.69%
Western Digital Corp. (WDC) $84.09 1.68%
Ross Stores Inc. (ROST) $63.45 1.47%
Charter Communications Inc. (CHTR) $336.80 1.45%
Dollar Tree Inc (DLTR) $78.05 1.30%
Nasdaq 100 - Fallers
Incyte Corp. (INCY) $135.50 -2.12%
Shire Plc Ads (SHPG) $171.55 -2.01%
Fastenal Co. (FAST) $50.95 -1.47%
Amazon.Com Inc. (AMZN) $898.28 -1.21%
Vodafone Group Plc ADS (VOD) $25.81 -1.04%
Twenty-First Century Fox Inc Class B (FOX) $30.55 -0.91%
Twenty-First Century Fox Inc Class A (FOXA) $31.12 -0.83%
Alexion Pharmaceuticals Inc. (ALXN) $115.49 -0.62%
Xilinx Inc. (XLNX) $56.34 -0.55%
Intel Corp. (INTC) $36.03 -0.52%