RTTNews - Following a strong start on the heels of encouraging economic data Thursday, stocks were boosted higher by trader reaction to the results of the thirty-year bond auction. The major averages ended the day well off their highs, however, giving back some ground in late day trading.
Stocks showed a notable upward move in afternoon trading as traders digested the results of the Treasury Department's auction of $11.0 billion worth of thirty-year bonds. The sale drew a high-yield of 4.72 percent, its highest level since August of 2007 but below estimates of 4.80 percent.
The auction also attracted strong demand, with the bid-to-cover ratio coming in at 2.68. The sale of government-backed debt enjoyed strong interest from foreign financial entities seeking to bolster their positions in guaranteed returns.
On the economic front, a Commerce Department report showed that retail sales rose 0.5 percent in May following a revised 0.2 percent decrease in April. Economists had expected sales to increase by 0.5 percent compared to the 0.4 percent decrease originally reported for the previous month.
A considerable increase in sales by gas stations contributed to the retail sales growth, with gas station sales jumping 3.6 percent in May after slipping 0.8 percent in April. Excluding the increase in sales by gas station, retail sales showed a much more modest increase of 0.2 percent.
Separately, the U.S. Labor Department revealed that initial jobless claims, a closely watched gauge of layoffs, came in at 601,000 for the week ended at June 6th. This was down 24,000 from the previous week's revised level of 625,000.
However, continuing claims, which measure the number of people receiving ongoing unemployment help, rose to 6.816 million in the week ended May 30th. Due to an upward revision to the previous week's figure, continuing claims rose to a new record high for the 19th consecutive week.
In other news, the House Oversight and Government Reform Committee hosted former Bank of America CEO Ken Lewis as part of a growing investigation into whether government officials pressured the bank to withhold details about the purchase of Merrill Lynch from investors despite ballooning losses at the brokerage firm.
While Lewis told the committee that the alleged threats from federal officials to take drastic actions if Bank of America backed out of the deal influenced his decision, he said they were not the deciding factor.
The major averages ended the session moderately higher, although well off their best levels of the day. The Dow closed up 31.90 points or 0.4 percent at 8,770.92, the Nasdaq closed up 9.29 points or 0.5 percent at 1,862.37 and the S&P 500 closed up 5.74 points or 0.6 percent at 944.89.
Most of the major sectors moved higher over the course of the trading day, prompting the major averages to post solid gains on the day.
Despite the late day pullback by the broader markets, significant strength remained visible among resource stocks, with natural gas, steel, and oil service stocks turning in particularly strong performances. Notably, the Amex Steel Index rose by 3.1 percent on the day, closing at its best level since early October.
Also finishing at comparable highs, were the Amex Natural Gas Index and the Philadelphia Oil Service Index, which closed up by 3.4 percent and 2.7 percent on the session. The sectors were helped significantly by an increase in commodity prices on the NYMEX.
In addition, computer hardware, biotechnology, banking, and utility stocks also posted strong gains, further indication of the broad based strength seen in the equity markets on the day.
Meanwhile, housing and real estate stocks bucked the day's uptrend, with the Morgan Stanley Real Estate Index and the Philadelphia Housing Sector Index falling by 1.8 percent and 2.2 percent, respectively. Some retail and semiconductor stocks also declined on the day.
Most Dow components finished the day in positive territory, helping the blue chip in index to post a moderate gain for the session.
Chevron (CVX) turned in a strong performance on the day, rising by 2.4 percent. With the advance, the stock added to its recent gains and closed at its best level in just over four months.
Bank of America (BAC) led the way higher in the Dow, rising by 8.3 percent on the day and reaching its best closing price in a month. The stock was driven higher following an upgrade by Keefe, Bruyette & Woods, which raised its rating on the stock to Outperform from Market Perform.
Alcoa (AA) also saw considerable strength, posting a 6.4 percent gain on the day. The day's climb drove shares of the aluminum manufacturing giant to their best closing level in over seven months.
Additionally, shares of Pfizer (PFE) and Merck (MRK) also rose, jumping by 4.1 percent and 2.3 percent, respectively. With the move, the stocks bounced off of the multi-week lows set in the previous session.
Shares of Coca-Cola (KO), Hewlett Packard and (HPQ) and AT&T (T) also saw considerable strength on the day.
Despite the day's broad-based gains, shares of American Express (AXP) and Boeing (BA) saw some weakness, falling by 4 percent and 3.1 percent, respectively. With the retreat, the stocks backed well off the highs set earlier this week.
In overseas trading, stock markets across the Asia-Pacific region ended Thursday's session largely unchanged. Japan's benchmark Nikkei 225 Index fell by 0.1 percent, while Hong Kong's Hang Seng closed up by less than a tenth of a percent.
Meanwhile, the major European markets all closed higher following some early uncertainty. The U.K.'s FTSE 100 and the French CAC 40 Index both rose 0.6 percent, while German DAX Index closed up 1.1 percent.
In the bond markets, treasuries surged following the auction of the thirty-year bond finishing notably higher on the day. Subsequently, the yield on the benchmark ten-year note closed at 3.862 percent, a drop of 7.4 basis points on the day.
Friday's trading is likely to be influenced by the Reuters/University of Michigan's initial reading on consumer sentiment for the month of June. Economists expect the reading to climb to 69.5 compared to May's revised reading of 68.7. The report is due to be released at 9:55 a.m. ET.
Traders may also keep an eye on the Labor Department's report on import and export prices in the month of May. The report may attract attention amid concerns about inflation as the U.S. begins to recover from the recession.
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