U.S. Stocks Give Back Ground After Early Rally But Close In Positive Territory

Stocks moved sharply higher in early trading on Thursday but gave back ground over the course of the trading session. The major averages pulled back well off their best levels but recovered going into the close to end the day in positive territory.

The major averages all closed higher on the day, with the tech-heavy Nasdaq posting a standout gain. While the Nasdaq jumped 117.44 points or 1.0 percent to 11,787.40, the S&P 500 rose 11.75 points or 0.3 percent to 3,948.72 and the Dow edged up 76.14 points or 0.2 percent to 32,105.25.

The early rally on Wall Street came as traders continued to react to yesterday’s monetary policy announcement by the Federal Reserve.

While some traders were initially disappointed the Fed decided to continue raising rates despite recent banking industry turmoil, indications the central bank is nearing the end of its tightening cycle generated some buying interest.

The latest projections suggest the Fed plans just one more quarter-point rate increase this year, with CME Group’s FedWatch Tool currently indicating a 31.3 percent chance the rate hike will come in May and a 68.9 percent chance rates will remain unchanged.

Even if the Fed raises rates again at its next meeting, traders may take some comfort in knowing officials feel a range of 5.0 to 5.25 percent will be the so-called “terminal rate.”

Buying interest waned over the course of the session, however, as concerns about the recent trouble in the banking sector continue to hang over the markets.

In U.S. economic news, a report released by the Labor Department unexpectedly showed a slight decrease by first-time claims for U.S. unemployment benefits in the week ended March 18th.

The Labor Department said initial jobless claims slipped to 191,000, a decrease of 1,000 from the previous week’s unrevised level of 192,000. Economists had expected jobless claims to rise to 201,000.

The report said the less volatile four-week moving average also edged down to 196,250, a decrease of 250 from the previous week’s unrevised average of 196,500.

The Commerce Department also released a report showing new home sales in the U.S. increased from a significantly downwardly revised level in the month of February.

The report said new home sales climbed by 1.1 percent to an annual rate of 640,000 in February after jumping by 1.8 percent to a downwardly revised rate of 633,000 in January.

Economists had expected new home sales to pull back to an annual rate of 645,000 from the 670,000 originally reported for the previous month.

Sector News

Semiconductor stocks moved sharply higher on the day, driving the Philadelphia Semiconductor Index up by 2.7 percent to its best closing level in eleven months.

Considerable strength was also visible among gold stocks, as reflected by the 1.9 percent jump by the NYSE Arca Gold Bugs Index. The strength in the sector comes as the price of gold for April delivery spiked $46.30 to $1,995.90 an ounce.

Software stocks also showed a strong move to the upside on the day, with the Dow Jones U.S. Software Index climbing by 1.8 percent.

Meanwhile, oil service stocks came under pressure over the course of the session, dragging the Philadelphia Oil Service Index down by 2.5 percent. A notable decrease by the price of crude oil weighed on the sector.

Airline, banking and natural gas stocks also showed notable moves to the downside, contributing to the mid-day pullback by the broader markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan’s Nikkei 225 Index edged down by 0.2 percent, while China’s Shanghai Composite Index climbed by 0.6 percent.

The major European markets also finished the day mixed. While the French CAC 40 Index inched up by 0.1 percent, the German DAX Index closed just below the unchanged line and the U.K.’s FTSE 100 Index slid by 0.9 percent.

In the bond market, treasuries extended the strong upward move seen over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slumped by 9.4 basis points to 3.406 percent.

Looking Ahead

Trading activity on Friday may be impacted by reaction to a report on durable goods orders in the month of February.

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