Japan-Easing Outweighs Unemployment Increase

Although Thursday’s report on initial unemployment claims indicated a 7.8 percent increase, rather than the decline expected by economists, good news from Japan helped feed investors’ appetite for risk. The Bank of Japan announced that it will purchase 7.5 trillion yen ($78.6 billion) in government bonds each month in order to reach its 2 percent inflation target in two years as part of Prime Minister Shinzo Abe’s “Abenomics” agenda. The move will double the country’s monetary base.

Although investors’ enthusiasm about the latest phase of Abenomics was challenged by disappointment resulting from the downbeat report on initial unemployment claims, the Dow Jones Industrial Average (DIA) picked up 55 points, closing at 14,606 for a gain of 0.38 percent.

The S&P 500 (SPY) rose 0.40 percent to close at 1559.98.

The Nasdaq 100 (QQQ) remained unchanged while the Russell 2000 (IWM) had a great day with a gain of 0.92 percent.

In other major markets, oil (NYSEARCA:USO) was one of the losers, sinking 1.07 percent to close at $33.40.

On London’s ICE Futures Europe Exchange, May futures for Brent crude oil declined by 69 cents (0.65 percent) to $106.27/bbl. (BNO).

April Gold Futures advanced by only ten cents to $1,552.90 per ounce following Tuesday’s bearish report on the yellow metal from Société Générale (GLD).

Transports had a nice late-day rally with the Dow Jones Transportation Index (IYT) advancing 0.31 percent.

European markets saw red numbers everywhere, while Japan’s Nikkei 225 Stock Average jumped by 2.20 percent. China’s stock markets were closed on Thursday and they will be closed again on Friday due to the Ching Ming Festival holiday.

Technical indicators point to an overbought market with declining momentum near significant long term resistance lines. The S&P 500 MACD remains below the signal line, suggesting a further decline.

For the day, major sectors finished mostly in positive territory with the energy sector showing continued weakness while the technology sector remained flat – despite a good day for Facebook (NASDAQ:FB).

Consumer Discretionary (XLY): +0.57%

Technology: (XLK): +0.03%

Industrials (XLI): +0.44%

Materials: (XLB): +0.87%

Energy (XLE): -0.13%

Financials: (XLF): +0.89%

Utilities (XLU): +0.95%

Health Care: (XLV): +0.45%

Consumer Staples (XLP): +0.53%

Tomorrow brings the highly-anticipated non-farm payrolls report from the Bureau of Labor Statistics.

Bottom line: Monetary easing came to the rescue of the American stock market once again – although on Thursday it was provided by Japan. As a result, disappointment concerning the rise in initial unemployment claims was overridden by enthusiasm about Abenomics.

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