Economic News Boosts Stocks

Thursday brought a truckload of upbeat economic news, which may have led investors to believe that the economy is strong enough to withstand the drag which will be created by the taper of the Fed’s bond-buying program. Although the week’s initial unemployment claims rose more than expected to 336,000 – the four-week moving average hit its lowest level since November of 2007.

Markit Economics reported that its Flash U.S. Manufacturing PMI for August rose to 53.9 from July’s 53.7. Economists were expecting a less-significant increase to 53.5.

The Federal Housing Finance Agency (FHFA) reported that from the second quarter of 2012 to the second quarter of 2013, house prices rose 7.2 percent.

The Kansas City Federal Reserve disclosed that the headline composite index for its Tenth District Manufacturing Survey rose to 8 in August from 6 in July. Economists had been expecting a decline to 5.

The Dow Jones Industrial Average (DIA) picked up 66 points to finish Thursday’s trading session at 14,963 for a 0.44 percent advance. The S&P 500 (SPY) rose 0.86 percent to close at 1,656.

The Nasdaq 100 (QQQ) jumped 0.99 percent to finish at 3,101. The Russell 2000 (IWM) skyrocketed 1.43 percent to end the day at 1,036.

The Nasdaq Exchange was out of commission for three hours after a software problem arose at 12:20 EDT.

In other major markets, oil (USO) jumped 1.00 percent to close at $37.54.

On London’s ICE Futures Europe Exchange, October futures for Brent crude oil advanced by 17 cents (0.15 percent) to $109.98/bbl. (BNO).

December gold futures advanced by $5.40 (0.39 percent) to $1,375.50 per ounce (GLD).

Transports zipped above Area 51 during Thursday’s session, with the Dow Jones Transportation Average (IYT) accelerating 2.04 percent.

In Japan, stocks faded despite the fact that the yen weakened to 98.30 per dollar near the end of Thursday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). Tepco’s mess in Fukushima continued to dominate the nation’s news coverage, as the utility’s vice-president, Zengo Aizawa called for international assistance in coping with the damage-control effort. The Nikkei 225 Stock Average declined 0.44 percent to 13,365 (EWJ).

In China, stocks made a slight retreat as a continuing decline in the materials sector overshadowed the upbeat HSBC Flash Manufacturing PMI report, which made an unexpected surge into the range of expansion. The flash Manufacturing PMI for August rose to 50.1 from July’s 47.7. Economists were expecting a less-significant advance to 48.2. Nevertheless, the Shanghai Composite Index declined 0.28 percent to 2,067 (FXI). On the other hand, Hong Kong’s Hang Seng Index climbed 0.36 percent to end the session at 21,895 (EWH).

European stocks skyrocketed on Thursday after the Markit Flash Eurozone PMI report for August indicated that the Eurozone Composite PMI jumped to 51.7 from July’s 50.5 for its highest reading in more than two years (VGK).

The Euro STOXX 50 Index finished Thursday’s session with a 1.36 percent jump to 2,812 – climbing further above its 50-day moving average of 2,712. Its Relative Strength Index is 56.30 (FEZ).

Technical indicators revealed that the S&P 500 failed to close above its 50-day moving average of 1,658 after finishing Thursday’s session with a 0.86 percent surge to 1,656. At this point, bears are watching the formation of a head-and-shoulders pattern on the S&P chart, from the period beginning in early May. (There already is a pinhead-and-shoulders pattern running from the period beginning on July 10 through August 16.) Its Relative Strength Index jumped from 35.66 to 43.49. The MACD is below the zero line as well as the signal line, suggesting a decline.

For Thursday, all sectors were solidly in positive territory. The energy sector took the lead, with a gain of 1.49 percent.

Consumer Discretionary (XLY): +1.00%

Technology: (XLK): +0.44%

Industrials (XLI): +1.37%

Materials: (XLB): +1.19%

Energy (XLE): +1.49%

Financials: (XLF): +1.16%

Utilities (XLU): +0.57%

Health Care: (XLV): +0.65%

Consumer Staples (XLP): +0.43%

Bottom line: The recent bout of anxiety concerning the upcoming taper of the Fed’s bond-buying took a backseat to bullishness on Thursday as a truckload of upbeat economic data put investors in a “risk on” mode.

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