[Chart courtesy of MarketWatch.com]
Domestic stock markets surged to close at the highs of the day, marking the second-best single day gains year-to-date, on signs that the fiscal stalemate on Capitol Hill may be beginning to thaw. The Dow rocketed over 300 points while the market rally left the S&P 500 less than 2 percent away from its record closing high set three weeks ago.
Traders now focus on an earnings season that begins in earnest on Friday with results from top banks JPMorgan and Wells Fargo. The eased fiscal concerns overshadowed a sharp increase in domestic initial jobless claims, which were impacted by technical issues in California and out-of-work non-federal workers due to the government shutdown.
Equities registered the bulk of their gains at the open amid indications the budget stalemate may be getting a bit closer to a resolution. Participants rushed into equities after House Republicans proposed extending the debt limit by six weeks in order to allow for a broader discussion on spending.
All ten sectors registered solid gains with financials (+2.9%) ending in the lead. The sector outperformed for the second consecutive session as JPMorgan Chase and Wells Fargo settled with respective gains of 3.5% and 2.7%.
The Nasdaq outperformed as biotech companies rallied after seeing sharp losses earlier in the week. The iShares Nasdaq Biotechnology ETF (IBB 201.47, +6.97) spiked 3.6%, but is still off 5.2% this week. The relative strength of biotech helped the health care sector (+2.3%) end ahead of the broader market while the remaining countercyclical groups (consumer staples, telecom services, and utilities) underperformed with gains between 1.4% and 1.9%.
In today’s economic data, weekly initial jobless claims jumped by 66,000, the highest since March and well above the level that economists had expected. However, half of the surge in initial claims was attributed to technical issues in California, while the dismissal of non-federal workers amid the government shutdown accounted for about 15,000 of the rise, per the Labor Department. Treasuries were mixed amid the improved fiscal sentiment, while gold was lower and the U.S. dollar and crude oil prices ended higher.
Our Trend Tracking Indexes (TTIs) followed renewed upward momentum with the Domestic TTI ending at +2.75% while the International TTI rallied to +6.18%.