Here’s Why Market Joys Returned

The S&P 500 reaches a record high after initial unemployment claims drop to their lowest level since 2008.

The U.S. Department of Labor’s weekly report on initial unemployment claims for the week ending April 27 dropped to 324,000. It was the lowest weekly level for initial claims since 2008. The report sent the S&P 500 (NYSEARCA:SPY) to a new record intraday high and a new record high close at 1,597.59, edging out Tuesday’s record at 1,597.57. The Dow Jones Industrial Average (NYSEARCA:DIA) jumped 130 points to hit 14,831 for an advance of 0.89 percent. The S&P 500 surged 0.94 percent to close at a record high of 1,597.59 after setting a new intraday record high of 1,598.60.

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The Nasdaq 100 (NASDAQ:QQQ) surged 1.32 percent to 2,911. The Russell 2000 (NYSEARCA:IWM) soared 1.69 percent to end the day at 939.

In other major markets, oil (NYSEARCA:USO) skyrocketed 3.40 percent to close at $33.49. On London’s ICE Futures Europe Exchange, June futures for Brent crude oil  advanced by $1.80, or 1.80 percent, to $101.75/bbl. (NYSEARCA:BNO, NYSEARCA:USO). June gold futures advanced by $22.40, or 1.55 percent, to $1,468.60 per ounce (NYSEARCA:GLD)

Transports popped the clutch on Thursday, with the Dow Jones Transportation Index (NYSEARCA:IYT) jumping 1.06 percent.

The “Draghi put” came to the rescue again on Thursday as the major European stock indices managed to make a modest advance despite a dismal April euro zone Manufacturing PMI from Markit Economics (NYSEARCA:VGK). In anticipation of the report, the European Central Bank cut its key interest rate from 0.75 percent to 0.50 percent.

The Euro STOXX 50 Index finished Thursday’s trading session with a 0.26 percent advance to 2,718 — remaining above its 50-day moving average of 2,653. After breaking above its overhead resistance level of 2,700 on January 21, the STOXX 50 continues to test resistance at that level, which had been a barrier since the beginning of the year.

In Japan, stock prices fell as the yen continued to remain as strong as approximately 97.25 per dollar. A stronger yen results in less-competitive prices for Japanese exports in foreign markets (NYSEARCA:FXY). The Nikkei 225 Stock Average fell 0.76 percent to 13,694 (NYSEARCA:EWJ).

In China, stocks declined after the HSBC China Manufacturing PMI for April declined to 50.4 from 51.6 in March. The result was consistent with the government’s official manufacturing PMI result for April, which declined to 50.6 from the March reading of 50.9. The Shanghai Composite Index declined 0.17 percent to 2,174 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index fell 0.30 percent to 22,668 (NYSEARCA:EWH).

Technical indicators reveal that the S&P 500 remains above its 50-day moving average of 1,555 after hitting a new record-high close of 1,597.59 — motivating bears to suspect that we are watching the formation of a double-top, which would signal a decline.  Its Relative Strength Index advanced from 55.16 to 59.72.  Although the MACD crossed above the signal line last Thursday, it has yet to make a significant departure from there.  A break back below the signal line would suggest the likelihood of a decline.

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For the day, all sectors finished solidly in positive territory except for utilities, which declined by only 12 basis points. Energy was the clear leader of the group after taking a hard hit on Wednesday.

Consumer Discretionary (NYSEARCA:XLY):  +0.98 percent

Technology (NYSEARCA:XLK):  +1.18 percent

Industrials (NYSEARCA:XLI):  +1.12 percent

Materials (NYSEARCA:XLB):  +0.67 percent

Energy (NYSEARCA:XLE):  +1.31 percent

Financials (NYSEARCA:XLF):  +0.87 percent

Utilities (NYSEARCA:XLU):  -0.12 percent

Health Care (NYSEARCA:XLV):  +1.11 percent

Consumer Staples (NYSEARCA:XLP):  +0.37 percent

Bottom line: Stocks were back to setting new records again on Thursday after initial unemployment claims dropped to their lowest level since 2008. 

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John Nyaradi is the author of The ETF Investing Premium Newsletter.

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