Published September 06, 2012
FOX Business: The Power to Prosper
The markets zoomed higher Thursday, with the broad S&P 500 hitting its highest level since May 2008, after a round of stronger-than-expected data on the U.S. economy and the ECB's plan to ease eurozone borrowing costs whetted traders' buying appetites.
As of 12:35 p.m. ET, the Dow Jones Industrial Average climbed 234 points, or 1.8%, to 13282, the S&P 500 gained 27.2 points, or 1.9%, to 1431 and the Nasdaq Composite rose 62.8 points, or 2.1%, to 3132.
Every major sector was in the green, led by economically-sensitive materials, financial, energy and industrial stocks. Indeed, 8% of S&P 500 components hit 52-week highs on the day, including Disney (DIS), EBay (EBAY) and News Corporation (NWSA), the parent of FOX Business.
The European Central Bank finally described its plan to dip into embattled sovereign debt markets in a bid to quell the eurozone debt crisis. The plan, which ECB President Mario Draghi referred to at a press conference as outright monetary transactions, will involve purchasing short-term bonds between one and three-year maturity. When bond prices rise, the yield, or borrowing cost, declines.
The buying will be conditional on countries sticking to already agreed upon austerity measures. It will be unlimited in scope, and the central bank won't become a senior creditor on the debt, as some analysts had feared. The action will be "fully sterilized," meaning it theoretically shouldn't add to the ECB's balance sheet.
The ECB also eased its collateral requirements in such a way that borrowers can use a wider variety of instruments to get loans.
Spanish and Italian bond yields, both of which have been under the microscope in recent months, fell sharply on the news. Indeed, Italy's 10-year yield hit a five-month low and Spain's hit a three-month low, according to data compiled by FOX Business.
Draghi also presented a more subdued economic outlook for the eurozone. The currency bloc's economy is now forecast to contract between 0.6% and 0.2% in 2012.
Also in central bank news, the Bank of England kept its benchmark interest rate at 0.5% and the size of its asset purchase program at 375 billion pounds, as expected.
There were also a slew of economic reports released on the day.
The ADP National Employment Report showed the private sector added 201,000 jobs in August, topping estimates for an increase of 140,000. The count from July was also revised up by 10,000 to 173,000. New claims for unemployment benefits fell to 365,000 from an upwardly revised 377,000 the week prior, the Labor Department said. Claims were expected to fall to 370,000 from an initially reported 374,000.
U.S. companies announced plans to cut 32,239 jobs in August, the fewest since December 2010, and 12.5% lower than the July tally, according to outplacement firm Challenger, Gray & Christmas.
All of these reports come ahead of the closely-watched monthly employment report from the Labor Department on Friday. The economy likely added 125,000 jobs in August, not enough to push the unemployment rate from 8.3%, economists said ahead of the report.
Later, the Institute for Supply Management publishes its gauge of service-sector activity.
In commodities, gold prices jumped $10.70, or 0.63%, to $1,705 a troy ounce -- the highest level since March. Oil prices, meanwhile, rallied $1.42, or 1.5%, to $96.78 a barrel. Wholesale New York Harbor gasoline soared 2.3% to $3.018 a gallon.
The Euro Stoxx 50 surged 3.4% to 2525, the English FTSE 100 rallied 2.1% to 5777 and the German DAX jumped 2.9% to 7167.
In Asia, the Japanese Nikkei 225 inched higher by 0.01% to 8681 and the Chiense Hang Seng ticked up 0.34% to 19209.