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Global Markets: Wall Street pushes stocks, oil higher ahead of jobs report

Published 08/04/2021, 10:24 PM
Updated 08/05/2021, 04:43 PM
© Reuters. FILE PHOTO: Visitors looks at an electronic board showing the Japan's Nikkei average at the Tokyo Stock Exchange (TSE) in Tokyo, Japan, February 9, 2016.  REUTERS/Issei Kato
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By Lawrence Delevingne

BOSTON (Reuters) - U.S. stocks and oil prices rebounded sharply on Thursday as unemployment claims declined and the trade deficit widened - positive economic data in the face of rising COVID-19 cases and signals of declining Federal Reserve stimulus.

The number of Americans filing new claims for unemployment benefits declined further last week, while layoffs dropped in July to their lowest level in just more than 21 years.

The U.S. trade deficit surged to a record high in June as businesses boosted imports to rebuild inventories.

The Dow Jones Industrial Average rose 271.58 points, or 0.78%, to 35,064.25, the S&P 500 gained 26.46 points, or 0.60%, to 4,429.12 and the Nasdaq Composite added 114.58 points, or 0.78%, to 14,895.12.

"Yesterday's record high reading on the Services PMI and today's unemployment claims data have reinvigorated confidence on the economic growth front," Dave Donabedian, chief investment officer of $92 billion CIBC Private Wealth U.S., wrote in an email.

A measure of U.S. services industry activity jumped to a record high in July, boosted by the shift in spending to services from goods.

"Investors definitely are keeping an eye on the Delta variant, but mostly view it as a speed bump for the economy rather than a showstopper," Donabedian said.

Goldman Sachs (NYSE:GS) market strategists raised their year-end and 2022 price targets for the S&P 500 Index, citing "the combination of higher-than-expected S&P 500 earnings and lower-than-expected interest rates."

Still, investors want to know how low rates will stay, and for how long.

On Wednesday, U.S. Federal Reserve Vice Chair Richard Clarida, a major architect of the Fed's new strategy, said he felt conditions for raising interest rates could be met by the end of 2022, raising expectations that the central bank could scale back its bond-buying program soon.

A key indicator is due on Friday with the U.S. non-farm payrolls report, seen as key to the U.S. central bank's policy stance.

"Everyone is on pins and needles waiting for tomorrow's jobs report, which will clearly dictate how the markets close out the week," Michael S. Harris of Verdence Capital Advisors in Hunt Valley, Maryland, wrote in an email.

The dollar held gains against a basket of currencies after Clarida's hawkish remarks, trading around 92.258 after hitting an eight-day high of 92.352.

Traders sent U.S. Treasury yields higher on Thursday as risk sentiment improved after the healthy jobless claims report and ahead of the more detailed employment data.

Benchmark 10-year notes last yielded 1.2235%, up from 1.184% late on Wednesday.

Oil prices rose more than 1% on increasing Middle East tensions.

© Reuters. FILE PHOTO: A Wall Street sign is pictured outside the New York Stock Exchange in New York, October 28, 2013.  REUTERS/Carlo Allegri/File Photo

U.S. crude rose 1.41% to $69.11 per barrel and Brent was at $71.25, up 1.24% on the day.

Gold fell to test the pivotal $1,800 support level, with spot gold dropping 0.4% to $1,803.97 an ounce.

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