Good news from the Department of Labor got stocks out of the red on Thursday, ending a five-day losing streak, although the budget battle on Capitol Hill continued.
The U.S. Department of Labor reported that for the week ending September 21, 305,000 initial unemployment claims were filed, representing a 5,000-claim decline. More important, the 4-week moving average fell to 308,000 — its lowest level since June of 2007.
The Dow Jones Industrial Average (NYSEARCA:DIA) picked up 55 points to finish Thursday’s trading session at 15,328 for a 0.36 percent advance. The S&P 500 (NYSEARCA:SPY) rose 0.35 percent to close at 1,698. The Nasdaq 100 (NASDAQ:QQQ) surged 0.79 percent to finish at 3,234. The Russell 2000 (NYSEARCA:IWM) advanced 0.46 percent to end the day at 1,078. Despite Thursday’s advance, the Russell 2000 fell 0.69 percent short of setting a new, record intraday high for the third consecutive session, after climbing only as high as 1.081.32.
In other major markets, oil (NYSEARCA:USO) climbed 0.54 percent to close at $37.08. On London’s ICE Futures Europe Exchange, November futures for Brent crude oil advanced 82 cents (0.76 percent) to $108.23/bbl. (NYSEARCA:BNO). December gold futures fell $11.80 (0.88 percent) to $1,324.40 per ounce (NYSEARCA:GLD). Transports delivered some coin to investors on Thursday, with the Dow Jones Transportation Average (NYSEARCA:IYT) advancing 0.40 percent.
The exchange rate for the yen continued to act as the primary influence on the Japanese stock market during Thursday’s trading. The yen finally weakened for the first time this week, as expectations rose that Prime Minister Shinzo Abe will roll-out an economic stimulus package on October 1. The yen fell as far as 99.05 per dollar during Thursday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (NYSEARCA:FXY). The Nikkei 225 Stock Average jumped 1.22 percent to 14,799 (NYSEARCA:EWJ).
In China, stock prices fell after analysts pointed out that many of the stocks for companies involved with the Shanghai Free Trade Zone were overbought. The FTZ will open on September 29. The Peoples’ Daily debunked an earlier report by the South China Morning Post, indicating that the government would lift its ban on Facebook access for the FTZ (NASDAQ:FB). Apparently the “Free Trade Zone” will not be that free. The Shanghai Composite Index sank 1.94 percent to 2,155 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index declined 0.36 percent to end the session at 23,125 (NYSEARCA:EWH).
European stocks had a rollercoaster ride on Thursday, with the Euro STOXX 50 Index starting positive, sinking as low as 0.92 percent, climbing up out of the red and finally — falling back to finish the session with a slight decline.
In Italy, the FTSE MIB Index sank 1.20 percent on Thursday, after members of Silvio Berlusconi’s People of Freedom Party threatened to resign en masse if Berlusconi is forced out of the nation’s Senate because of his conviction for fraud. Italy’s Senate will vote on October 4, concerning whether the boot-shaped nation’s Upper House will give Berlusconi the boot. Both the nation’s President, Giorgio Napolitano, and Prime Minister Enrico Letta are standing firm against the bluff (NYSEARCA:EWI).
The Euro STOXX 50 Index finished Thursday’s session with a 0.15 percent decline to 2,922 — remaining well above its 50-day moving average of 2,813. Its Relative Strength Index is 65.26 (NYSEARCA:FEZ).
Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,680 after finishing Thursday’s session with a 0.35 percent advance to 1,698. Its Relative Strength Index rose from 54.28 to 56.71. Although the MACD remains above the zero line, it has assumed a declining trajectory, suggesting the likelihood of a retreat.
For Thursday, all sectors were solidly in positive territory, except for the financial sector (which was unchanged) and the utilities sector.
Consumer Discretionary (NYSEARCA:XLY): +0.95 percent
Technology: (NYSEARCA:XLK): +0.37 percent
Industrials (NYSEARCA:XLI): +0.45 percent
Materials: (NYSEARCA:XLB): +0.66 percent
Energy (NYSEARCA:XLE): +0.18 percent
Financials: (NYSEARCA:XLF): unchanged
Utilities (NYSEARCA:XLU): -0.13 percent
Health Care: (NYSEARCA:XLV): +0.35 percent
Consumer Staples (NYSEARCA:XLP): +0.52 percent
Bottom line: Investors felt encouraged after the four-week average of initial unemployment claims dropped to pre-recession levels. Nevertheless, enthusiasm was tempered by the growing likelihood of a partial government shutdown due to the budget impasse in Washington.
John Nyaradi is the author of The ETF Investing Premium Newsletter.