Markets snapped a two-day losing streak on Thursday, somewhat boosted by the ECB announcing a trillion-dollar stimulus plan that will kick off on Monday. Benchmarks swung up and down, but mostly stayed in positive territory and had dropped into the red for a very brief period post noon. Higher-than-expected initial claims numbers had offset some gains yesterday. It was the year's second lightest trading session, as investors refrained from betting big bucks ahead of Friday's nonfarm payroll report. The jobs numbers may influence the timing of the Fed's rate hike decision.
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The Dow Jones Industrial Average (DJI) gained 0.2% to close at 18,135.72. The Standard & Poor's 500 (S&P 500) added just 0.2% to move up to 2,101.04. The tech-laden Nasdaq Composite Index closed at 4,982.81; gaining 0.3%. The fear-gauge CBOE Volatility Index (VIX) dropped 1.3% to settle at 14.04. A total of about 5.7 billion shares were traded on Thursday, below the last five sessions' average of 6.5 billion. Advancers outpaced declining stocks on the NYSE. For 53% stocks that advanced, 43% declined.
Markets were somewhat aided by the European Central Bank (ECB) after it announced a 1 trillion euro ($1.1 trillion) bond-buying program. The repurchase is due to start from Monday, Mar 9. As announced in January, ECB will buy government bonds worth 60 billion euros a month through a quantitative easing program. The QE program will continue till Sep 2016. ECB President Mario Draghi said the ECB would purchase these bonds even if they have a negative yield. However, the negative yield should not cross -0.2%, as they need to be within the range of ECB's deposit rate.
The bank also increased growth and inflation targets. Growth estimates were revised up to 1.5%, 1.9% and 2.1% for 2015, 2016 and 2017 respectively. "The substantial, additional easing of our monetary policy stands, supports and reinforces the emergence of more favorable developments of the euro area economy, financial market conditions and the cost of external finance for the private economy have eased further. Borrowing conditions for firms and households have improved considerably," Draghi said.
However, the announcement of the planned commencement of the program from Mar 9 could help markets move only marginally higher. Some analysts said the muted reaction was due to apprehensions over ECB's execution of the plan. Also, as the monetary stimulus was already announced in January, the news may have already been factored into stocks.
Meanwhile, China revised its economic growth estimate to 7% for this year. The 7.4% recorded in 2014 was the slowest pace of growth in about 25 years.
Economic data was disappointing yesterday. New orders for manufactured goods in January dropped for the sixth consecutive month. The metric declined 0.2% to $470 billion. In contrast, the consensus estimate had expected a 0.3% gain.
Some gains were also offset by higher-than-expected addition in initial claims. The U.S. Department of Labor reported seasonally adjusted initial claims for the week ending Feb 28 at 320,000, up 7000 from prior week's unrevised level of 313,000. Gains in initial claims was also contrary to estimates of a decline to 299, 000.
Initial claims numbers came a day after Automatic Data Processing, Inc. ( ADP ) reported lower private-sector job creation numbers. A total of 212,000 private jobs were added in February, lower than the 250,000 job additions in January.
Now, investors await crucial nonfarm payrolls data on Friday. Consensus estimate predicts an addition of 235, 000 nonfarm jobs in February. Last month, the U.S. Department of Labor had reported that the U.S. economy created 257,000 new jobs in January. Nonetheless, another report indicating 200, 000 job additions would mean the 12th consecutive month of such gains.
Separately, the NASDAQ Biotechnology index hit an all-time high after gaining 2.2%. Gains were largely boosted by the news of AbbVie Inc. ( ABBV ) acquiring Pharmacyclics Inc. ( PCYC ) for nearly $21 billion. Pharmacyclics was among the biggest gainers of the index as it jumped 10.3%. AbbVie however dropped 5.7%.
The gains also helped the healthcare sector end in the green. Health Care Select Sector SPDR ETF (XLV) gained 0.4%. Key stocks from the sector such as Johnson & Johnson ( JNJ ), Gilead Sciences Inc. ( GILD ), Medtronic plc ( MDT ), Bristol-Myers Squibb Company ( BMY ) and Biogen Idec Inc. ( BIIB ) gained 0.9%, 0.3%, 0.4%, 0.6% and 2.8%, respectively.