S&P 500 Hits 4.5-Year High
Published: Thursday, 6 Sep 2012
By: JeeYeon Park
Stocks added to sharp gains Thursday after a batch of upbeat economic reports and after ECB President Mario Draghi said the central bank agreed on a new bond-buying program.
The S&P 500 hit its best level since May 2008, while the Nasdaq 100 is trading near a 12-year high.
The Dow Jones Industrial Average soared more than 200 points, led by JPMorgan [JPM 38.82 1.71 (+4.61%) ] and BofA [BAC 8.32 0.37 (+4.65%) ], after squeezing out a small gain in the previous session.
The S&P 500 and the Nasdaq also advanced. The CBOE Volatility Index, widely considered the best gauge of fear in the market, tumbled below 17.
All key S&P sectors were firmly in positive territory, led by financials and industrials.
“There’s no ambiguity about the rally today—every economic data point we got was positive and the market liked Draghi’s comments,” said Brian Gendreau, market strategist at Cetera Financial Group. “We don’t know if this new program is going to succeed, but the ECB seems to be squarely in the camp of taking positive action.”
ECB President Mario Draghi said the new bond-buying program will be a "fully effective backstop," speaking at a press conference after the Council's monthly meeting in Frankfurt.
Seeking to back up his pledge to do whatever it takes to preserve the euro, Draghi said the new bond-buying program, aimed at the secondary market, would "safeguard the monetary policy transmission in all countries in the euro zone area." (Read More: Nearly Half of Germans Don't Trust Draghi)
Meanwhile, the ECB said it expects a very gradual economic recovery in the euro zone and slashed its GDP forecasts for the year. The euro erased gains against the dollar, while European shares rallied. Earlier, the ECB kept interest rates unchanged at 0.75 percent.
"People have been fatigued and cynical about Europe so that leaves a lot of room for upside," said Gendreau.
On the economic front, the pace of growth in the services sector rose to 53.7 in August, according to the Institute for Supply Management's non-manufacturing report. Economists had expected a reading of 52.5. A reading above 50 indicates expansion in the sector.
Jobless claims declined 12,000 last week to a seasonally adjusted 365,000, hitting its lowest level in a month, according to the Labor Department. Economists expected claims to fall to to 370,000, according to a Reuters poll. However, the four-week moving average for new claims, edged up to 371,250.
Private businesses added 201,000 jobs in August, according to a closely watched report from ADP and Macroeconomic Advisors. Wall Street had been expecting an increase of 145,000 new jobs.
Meanwhile, employers announced 32,239 planned job cuts in August, down 12.5 percent from the previous month, to hit a 20-month low, according to a report from consultants Challenger, Gray & Christmas.
“These are good signs for tomorrow but do we really trade on fundamentals or on central banks?” said Joe Saluzzi of Themis Trading. “There are too many factors going on that fundamentals are taking second place to money printing issues.”
The jobs data come ahead of Friday's widely-watched monthly government report for August, which is projected to show nonfarm payrolls rose by a modest 125,000, while the unemployment rate is expected to hold steady at 8.3 percent.
Other economic reports out on Thursday include the Institute for Supply Management’s non-manufacturing index at 10 a.m., which tracks monthly changes in the service sector economy. Economists polled by Briefing.com predict the index fell in August to 52.4, down from 52.6 in July. A reading above 50 indicates an expansion in the non-manufacturing sector.
