FOX Business: The Power to Prosper
Stocks soared on Thursday, with the major market averages hitting multi-year highs, as traders cheered the European Central Bank's plan to ease eurozone borrowing costs and better-than-expected data on the U.S. economy.
The Dow Jones Industrial Average surged 245 points, or 1.9%, to 13292, the S&P 500 rallied 28.7 points, or 2%, to 1432 and the Nasdaq Composite soared 66.5 points, or 2.2%, to 3136.
The Dow closed at its highest level since December 2007, the S&P 500 logged its highest close since January 2008 and the Nasdaq notched its best level since November 2000. All three had their best day on a point and percentage basis since late June.
Every major sector was in the green, led by economically-sensitive materials, financial, information technology and industrial stocks. Indeed, more than 10% of S&P 500 components hit 52-week highs on the day, including Disney (NYSE:DIS), Home Depot (NYSE:HD), Kraft (NYSE:KFT) and Google (NASDAQ:GOOG).
Volume on the New York Stock Exchange was the highest since August 2. In a sign of the bullishness on Wall Street, 90% of trades on the NYSE were in advancing shares. The yield on the 10-year Treasury bond jumped 0.080-percentage point to 1.675% as traders ditched the safe-haven asset.
ECB to the Rescue
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.
Data Top Expectations
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.
The Institute for Supply Management's gauge of service-sector activity rose to 53.7 in August, the highest level since May, from 52.6 in July. The index was expected to fall slightly to 52.5. Readings above 50 indicate expansion, while those below point to contraction.
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.
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.