After seeing some volatility in the previous session, stocks moved mostly higher throughout much of the trading session on Thursday, ultimately closing firmly in positive territory. The strength initially came as investors responded well to the latest economic news, and it was extended on comments from Treasury Secretary Geithner and a pleasing seven-year note auction.
In economic news, the Labor Department released its most recent weekly jobless claims report, showing that initial claims rose to 652,000 from the previous week's revised figure of 644,000. Economists had expected jobless claims to rise to 650,000 from the 646,000 originally reported for the previous week.
The report also showed that continuing claims in the week ended March 14th rose to another new record high of 5.560 million from the preceding week's revised level of 5.438 million.
While the jobless claims data indicates continued weakness in the labor market, it suggests that the employment situation is stabilizing rather than showing a continued deterioration.
At the same time, the Commerce Department's final report on fourth quarter GDP showed that the economy contracted a little faster than previously estimated, although the revised drop in GDP was not quite as steep as economists had been expecting.
In an interview with RTT News, Mike Englund, chief economist of Action Economics discussed the latest reading on fourth quarter GDP, which he said is slightly better than many people had resigned themselves for.
Englund predicted that the final quarter of 2008 probably will be the worst of the recession, though he pegs the first quarter at down 4.5 percent, which means were not out of the woods. However, he expects GDP to turn positive at some point in the third or fourth quarter.
In other news, Treasury Secretary Tim Geithner called for a stronger regulatory system with increased government power during his testimony before the House Financial Services Committee.
Pushing for tougher rules on how big companies manage their finances as well as for tighter controls on some hedge funds and money-market mutual funds, Geithner outlined a broad plan to shore up the patchwork financial regulatory system, asking for the creation of a systemic risk regulator in order to oversee large financial institutions, like AIG (AIG).
Stocks saw some further upside in the afternoon, as the results of the Treasury Department's auction of $24 billion worth of seven-year notes helped to ease some of the recent concerns about the outlook for demand for government debt.
The seven-year note auction drew a yield of 2.384 percent and a bid-to-cover ratio of 2.52. The bid-to-cover ratio, an indicator of demand, came in well above the 2.11 reported for the previous auction of $22 billion worth of seven-year notes last month.
The major averages continued to perform well going into the close, ending the session at their best closing level in well over a month. The Dow closed up 174.75 points or 2.3 percent at 7,924.56, the Nasdaq closed up 58.05 points or 3.8 percent at 1,587.00 and the S&P 500 closed up 18.98 points or 2.3 percent at 832.86.
Despite an increase in the price of crude oil, transportation stocks turned in some of the strongest performances of the day. The Dow Jones Transportation Average ended the session with a gain of 8.2 percent, climbing to its highest level in just under a month and a half.
Within the transportation sector, trucking and railroad stocks led the way higher, although airline stocks also experienced notable strength. The Dow Jones Trucking Index and the Dow Jones Railroads Index ended the session up 8.6 percent and 8.3 percent, respectively
Semiconductor, defense, and retail stocks also posted considerable gains on the day, with the Philadelphia Semiconductor Index closing up 5.9 percent, while the Philadelphia Defense Index and the S&P Retail Index closed up 5.3 percent and 4.4 percent, respectively.
Within the retail sector, Best Buy (BBY) closed up 12.6 percent after the consumer electronics retailer reported fourth quarter earnings that fell year-over-year but came in considerably above expectations on an adjusted basis. With the gain, Best Buy ended the session at a five-month closing high.
Most of the other major sectors also showed strong upward moves over the course of the session, reflecting broad based strength in the markets. Significant strength was visible among health insurance, electronic storage, and housing stocks.
Nearly all of the Dow components ended the session in positive territory, contributing to the standout gain by the blue chip index.
One of the biggest gainers of the session was Hewlett-Packard (HPQ), which ended the day with a gain of 7.1 percent, lifting the stock to its best closing level in over a month.
General Motors (GM) also posted a considerable gain, closing up 14.1 percent on news that more than 6,000 UAW workers accepted buyout packages and that the Obama auto task force will back more loans.
Additionally, American Express (AXP) and Caterpillar (CAT) also posted noteworthy gains, with American Express and Caterpillar closing up 7.2 percent and 6.5 percent, respectively.
Intel (INTC), Microsoft (MSFT), and Alcoa (AA) are among the other Dow components that posted notable gains.
At the other end of the spectrum, Citigroup (C) and Bank of America (BAC) were the only Dow components that finished the session lower, falling 4.8 percent and 1.6 percent, respectively.
In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Thursday, with Japan's benchmark Nikkei 225 Index ending the trading session up 1.8 percent.
Meanwhile, the major European markets ultimately ended the session mixed. The German DAX Index and the U.K.'s FTSE 100 closed the trading day up 0.9 percent and 0.6 percent, respectively, while the French CAC 40 Index closed slightly below the unchanged line.
In the bond market, treasuries moved higher over the course of the trading day, benefiting from the strong demand for the seven-year note auction. Subsequently, the yield on the benchmark 10-year note ended the session down 3.9 basis points at 2.733 percent.
Trading on Friday could be impacted by the release of the Commerce Department's report on personal income and spending in the month of February along with the Reuters/University of Michigan's revised reading on consumer sentiment in the month of March.
Meanwhile, in corporate news, KB Home (KBH) is among the companies scheduled to release their quarterly results before the markets open on Friday.
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