NEW YORK— Good news about hiring and spending at retail businesses helped send the U.S. stock market sharply higher Thursday.
For investors, the pair of government reports offered more encouragement that the U.S. economic recovery will continue, even as Europe and Japan struggle. The Standard & Poor’s 500 index soared 23.84 points, or 1.5 percent, to 1,636.36.
The gains were broad. All 10 industry groups within the S&P 500 rose, led by retailers and other consumer-discretionary companies. Gannet soared 34 percent, the most in the S&P 500, on news that it would buy another media company, Belo.
Hoteles City Express SAB (HCITY*), Mexico’s third-largest hotel chain, tumbled in its first day of trading after pricing its initial public offering at the bottom of its projected range.
The shares fell 5.2 percent to 22.75 pesos at 1:11 p.m. in Mexico City. The benchmark IPC index of 35 Mexican companies slipped 0.2 percent.
Hoteles City raised 2.54 billion pesos ($200 million) in its IPO, or as much as 2.92 billion pesos if underwriters exercise an overallotment option, the Mexico City-based company said in a filing today. The price per share was 24 pesos. In earlier filings the company had estimated the shares would fetch as much as 29 pesos.
A plunge in shares in Tokyo prompted jitters in the world’s emerging markets yesterday as investors expressed fresh concern about the Japanese government’s recovery plan and the possible phasing out of America’s stimulus programme.
Japan’s leading stock market index, the Nikkei, fell by more than 6%, extending the fall in recent weeks to more than 20%, the official definition of a bear market.
The decline – accompanied by a rise in the Japanese yen on the foreign exchanges – triggered falls on other Asian bourses and led to early falls on European markets. But nerves were later steadied by stronger than expected jobs and retail sales figures from the US and the FTSE 100 in London ended the day five points higher at 6304.
U.S. stocks are going nowhere but down today.
The S&P 500 is now trading at 1625, down 0.7% from yesterday’s close and 15 points off this morning’s high of 1640.
The dollar-yen exchange rate, which has been closely correlated with the S&P 500, tanked earlier today, briefly falling below ¥94 to a low of ¥93.98 as the yen strengthened. However, it’s since stabilized around ¥94.20.
Stocks continue to fall, nonetheless.
Meanwhile, the yield on the 10-year U.S. Treasury note is rising and, at 2.14%, is now only 1 basis point lower from yesterday’s close.
Gold (up 0.7% at $1387 an ounce) and oil (up 1.3% at $97.99 a barrel) are both trading sideways this afternoon.
We all have a morning routine. Every morning I roll out of bed and before heading to the shower try to gauge what kind of market the day has in store. I do this by checking the S&P futures market for a look at the stock market and by looking at the yield on the 10-year U.S. Treasury bond for a look at the bond market (I used to do this on the TV, then the computer and now it’s the smart phone). These two data indicators have been a part of my day for most of my adult life.
I have to admit, the stock market gets most of the attention, but the 10-year U.S. Treasury rate is just as vital and sometimes says more about the state of the world than its stock market counterpart. That being said, watching the 10 year is boring, and has been especially boring over the past two years as rates have persisted below 3 percent, and often well below 2 percent.
The last six weeks, however, have been significant for this vital indicator, as this rate has moved from the incredibly low 1.6 percent level to closing Thursday at more than 2.2 percent.
Royal Bank of Scotland sunk into the red as the shock departure of chief executive Stephen Hester and another 2,000 job cuts raised fears over the lender.
The bank pulled back from earlier hefty share losses, but remained 3% lower as Shore Capital cut its rating on RBS from hold to sell and Charles Stanley branded Mr Hester’s exit a “damaging development”.
But the wider FTSE 100 Index broke its recent losing streak – up 5.2 points at 6304.6 – thanks to early session gains on Wall Street as better-than-expected US retail sales and jobless claims helped soothe concerns after another sharp sell-off in Japanese stocks.
The FTSE 100 had dropped more than 90 points at one stage, but later turned around after the Dow Jones Industrial Average opened in positive territory.
Japanese equity futures rallied, after the Nikkei 225 Stock Average entered a bear market, as U.S. shares halted a global slide amid better-than-forecast economic data and growing speculation the Federal Reserve will signal plans to maintain record-low interest rates.
Futures on the Nikkei 225 expiring in September jumped 3.8 percent to 12,870 as of 3 a.m. in Osaka. The Japanese equity benchmark has fallen 20 percent, crossing the threshold investors define as a bear market, after reaching a five-year high on May 22. The broader Topix index slid 4.8 percent yesterday, its seventh move of at least 1 percent in the past 10 sessions.
Japan’s stock market “had quite a rout last night, but it seems as though investors are thinking they will follow the U.S.,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., which manages $80 billion, wrote in an e-mail. “Japan has been extremely volatile this year. There’s been lots of big moves in both the stock market and the currency.”
Benchmarks were battered after the central bank of Japan made no additional changes to their previous monetary measures. Investors had expected Japan’s Central Bank to introduce additional measures to ensure stability in the bond market. Fears of the Federal Reserve curbing the bond purchase program also added to investor woes. Meanwhile, the European Commission suggested a series of “recommendations” to revive Europe’s sick steel industry. Machinery orders in Japan fell for the first time in the past three months owing to low “capital spending”. All the top ten S&P 500 industry groups suffered losses among which financial stocks suffered the most.
Investors are rotating from defensive, dividend paying stocks to cyclical names as the market continues to move higher and the economy improves, two analysts told CNBC on Thursday.
“I think that we’ve seen the pattern start six weeks ago. It’s been all cyclicals,” said Scott Wren, senior equity analyst at Wells Fargo. “That was after a good run from the defensives. I think that’s over. I think the pattern for the next 18-24 months is going to be very cyclical for the market.”
For defensive stocks, Wren added in a “Squawk on the Street” interview, “the valuations are stretched here and the S&P 500 is likely to end a little bit lower this year. So, you could see some capital losses there.”
Earlier, the Dow was down more than 100 points, and the S&P 500 broke below its 50-day moving average.
The Dow Jones industrial average was up 26.58 points, or 0.18 percent, at 14,987.17. The Standard & Poor’s 500 Index was up 7.20 points, or 0.45 percent, at 1,616.10. The Nasdaq Composite Index was up 8.43 points, or 0.25 percent, at 3,409.91.