Economic Report, ECB Spur Bank Rally; Europe Wobbles

[Chart courtesy of MarketWatch.com]

US stocks jumped Thursday with the Dow registering its third gain session in four after the latest jobless report beat estimates, and the US Fed said it allegedly can manage risks arising out of the latest round of balance sheet expansion.

Sentiment got a boost after a Labor Department report revealed initial unemployment benefits claims rose by 4,000 to 367,000 last, still lower than the psychological 400,000 mark and falling short of the projected 370,000. Factory orders also lent support with the August gauge slipping by 5.2 percent versus a projected 5.9 percent decline.

Earlier, the ECB President Mario Draghi stood by his previous pledge to save the euro and said it’s up to the region’s politicians now to seek help as needed.

Risk sentiment was buoyed after the latest FOMC minutes showed most of Chairman Bernanke’s colleagues thought risks could be managed since the central bank could make adjustments to its purchases in response to economic developments or changes in its assessment of the program’s efficacy or cost.

On September 13, the Federal Open Market Committee announced the central bank will buy $40 billion a month mortgage bonds every month. The latest round of monetary stimulus, known as quantitative easing-3, is aimed at spurring the housing market and bringing down unemployment rate that’s stuck over eight percent for 43 months.

The Dow Jones Industrial Average (DJIA) rallied 81 points. Breadth within the 30-stock blue-chip index continued to be positive with winners outpacing decliners 25 to 5.

The S&P 500 Index (SPX) added 10 points with financials and energy stocks gaining the most that included the benchmark’s all 10 major business groups.

Treasury yields rose for the first time in five days with the benchmark 10-year Treasury yield jumping five basis points to 1.67 percent while yield on 30-year Treasury bonds vaulted six basis points to 2.88 percent.

Meanwhile, the US dollar weakened Thursday after the European Central Bank decided to keep interest rates unchanged at 0.75 percent and signaled it stands ready to help when asked.

The Bank of England also kept its key rate steady at 0.5 percent. The ICE dollar index, an indicator of the greenback’s strength against a basket of six global currencies, fell to 79.376 from late Wednesday’s 79.967.

Across the Atlantic, the pan-European Stoxx Europe 600 index finished less than 0.1 percent lower ahead of the all-important US non-farm payrolls data tomorrow. After attending today’s policy meeting, ECB President Mario Draghi said rescheduling Greece’s debt will amount to monetary refinancing, and thus beyond the mandate of the central bank. While attending a post-meeting press conference, Draghi said the ECB stands ready to help once a country agrees to the conditions.

The Spanish IBEX 35 index slipped 0.2 percent with Telefonica SA dropping 0.7 percent after S&P cut the stock’s rating to sell from hold.

In Frankfurt, the DAX 30 index traded mixed while the index closed 0.2 percent lower. Automobile companies however rallied, led by BMW AG and Volkswagen AG after both companies reported a surge in exports to China.

In Paris, the CAC 40 index fell 0.1 percent though banking heavyweight Societe Generale added 1.7 percent for the day.

In the ETF space, commodity-linked funds rallied today. The United States Oil Fund (USO) jumped 4.08 percent after oil futures rose $3.57 a barrel today on heightened tensions in Syria, Turkey and Iran. A weak US dollar only added to the buying pressure after yesterday’s near total sell-off.

As gold futures headed higher by $16.70 an ounce today, the Van Eck Market Vectors TR Gold Miners Fund (GDX) surged, adding 2.90 percent for the day. The Van Eck Market Vectors Junior Gold Miners ETF (GDXJ) also rallied, adding 3.20 percent on the day.

Our Trend Tracking Indexes (TTIs) inched higher as well, and you can review all details, along with the most recent ETF momentum numbers, in the latest StatSheet, which I will post shortly.

Disclosure: No holdings

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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