Bulls' Blitz Overcomes Soaring Energy Prices
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Soaring energy prices couldn't deter a data-fueled rally that abruptly halted a three-day rout, which had pushed the Nasdaq and S&P 500 into negative territory for 2011.
The Dow Jones Industrial Average was higher by 161 points, or 1.4%, to 11774, the S&P 500 climbed 16.8 points, or 1.3%, to 1273 and the Nasdaq Composite was up 19.2 points, or 0.7%, to 2636. The FOX 50 jumped 11.1 points to 899.
The blue chips had their worst day since August on Wednesday, tumbling 2% amid concerns over the unfolding nuclear situation in Japan. The broad selloff also pushed the Nasdaq and S&P 500 into negative territory for 2011.
Upbeat data on the jobs market helped stocks rebound Thursday. The energy sector performed the best Thursday, with companies like ExxonMobil (NYSE:XOM) and Peabody Energy (NYSE:BTU) gaining significantly. Utilities like nuclear-plant operator Entergy (NYSE:ETR) lagged behind.
“Even though the Dow didn’t recover all of its losses from [Wednesday], the rebound today suggests investors were emboldened by President Obama’s comments as well as the favorable U.S. jobs and manufacturing reports," wrote John Prestbo, executive director and editor at Dow Jones Indexes.
Weekly jobless claims were lower by 16000 to 385000 in the prior week. The four-week-moving average, a figure that helps smooth volatility, has been below the 400000 threshold for three straight weeks. A reading below 400000 points to at least some level of recovery in the beleaguered labor market, economists say.
However, the situation in Japan remains volatile, and has driven stocks in recent sessions.
The markets can "turn around in a minute," said Joe Saluzzi, co-manager of trading at Themis Trading, citing recent headline-driven tumult.
Radiation continued seeping out of at least two stricken nuclear reactors that were damaged in the massive earthquake that hit the Japan last week. Emergency workers raced to cool the cores down, but it remained unclear Thursday whether their attempts would be successful at averting a catastrophe. U.N and American nuclear officials said the situation remained serious, but had stabilized somewhat.
Uncertainty over the conditions in Japan prompted the U.S. government to urge its citizens to leave the country and avoid unnecessary travel there. Indeed, the U.S. chartered private airplanes to aid in the evacuation process.
Japan's Nikkei 225 average, which has been extraordinarily volatile in recent sessions, slid 1.4% amid concerns over how long it would take for the Japanese economy to recover after the disaster.
The yen soared 1.9% against the U.S. dollar as Japanese investors sold American assets in a bid to pay for rescue and rebuilding efforts back home. A higher exchange rate makes it more expensive for companies to import Japanese goods, which could pose a problem as the Japanese economy recovers.
Continued clashes in numerous Middle Eastern countries have overshadowed worries over Japan's demand for oil, pushing prices higher. Security forces in oil-producing Bahrain participated in what U.S. Secretary of State Hillary Rodham Clinton described as an "alarming" crackdown on political protests.
"The North Africa and Middle East situation is starting to come to the forefront again," said Darin Newsom, senior commodities analyst at DTN.
"The money that left [the oil markets] in such a rush over the last week is starting to come back."
Light, sweet crude jumped $3.44, or 3.5%, to $101.42. A gallon of regular gas cost $3.55 on average nationwide, up from $3.12 last month and $2.79 last year, according to the AAA Fuel Gauge Report.
Soaring energy prices pushed consumer inflation up 0.5% in February -- the most since June 2009, according to the Labor Department. Core inflation, which excludes volatile food and energy prices, edged higher by 0.2%.
Economists have been paying particularly close attention to price levels since the Federal Reserve has embarked on a highly expansionary monetary policy regime in a bid to jump-start the U.S. economy. While the central bank's low-interest-rate policy, coupled with a trillion-dollar asset purchase program, can provide a boost to the economy, some economists worry it can lead to high levels of long-term inflation.
If consumer prices rise, economists worry, peoples' wage expectations could rise, which leads to wage inflation, a difficult situation to control.
Manufacturing activity in the Mid-Atlantic region saw its biggest gains since 1984 in March. The Federal Reserve Bank of Philadelphia said its manufacturing index jumped to 43.4 from 35.9 in the prior month. Economists were expecting the index to drop to 28.8.
However, the reading doesn't take into account the disaster that hit Japan, the world's third largest economy.
The situation "will change in light of the aftermath of the Japanese earthquake and its inevitable impact on global economic activity but at least we know the state of American manufacturing in this region was on good footing," wrote Peter Boockvar, Managing Director at Miller Tabak + Co., in a research note.
In metals, gold increased by $7.10, or 0.51%, $1403 a troy ounce.
General Motors (NYSE:GM) declared a 59.4 cents per share dividend on its preferred stock. Separately, the automaker said it would have to temporarily stop production of its Chevy Colorodo and GMC Canyon lines due to a lack of parts coming from Japan.
Apple (NASDAQ:AAPL) received a $500 a share price target from Credit Suisse.
FedEx (NYSE:FDX) revealed its fiscal third-quarter earnings edged 3.3% lower, but said expects fourth-quarter profits to hit between $1.66 to $1.83 a share, besting analysts' calls for $1.65 a share. Shares of the shipping company moved sharply higher.
Vodafone (NYSE:VOD) was upgraded from "reduce" to "neutral" by Evolution Securities, pushing shares of the mobile telecommunications company.
Wal-Mart (NYSE:WMT), Target (NYSE:TGT) and other retailers are pushing regulators to force Amazon.com (NASDAQ:AMZN) to charge sales tax, according to a report by The Wall Street Journal. The online retailer presently only has to charge tax in the five states in which it has a physical presence.
Hewlett Packard (NYSE:HPQ) was rated an "outperform" by Credit Suisse.
European shares soared: the English FTSE 100 was up 1.8% to 5,696, the French CAC 40 traded higher by 2.4% to 3786 and the German DAX jumped 2.2% to 6556.
Chinese stocks followed Japan lower, with the Hang Seng tumbling 1.8% to 22284.