U.S. Stocks Give Back Ground After Early Rally But Still Close Higher

After failing to sustain an early rally, stocks gave back some ground over the course of the trading session on Thursday. The major averages pulled back well off their best levels of the day but still managed to close in positive territory, with the Nasdaq reaching a new record closing high.

The major averages came under pressure going into the close but held on to moderate gains. The Dow rose 92.39 points or 0.4 percent to 25,827.36, the Nasdaq advanced 53.00 points or 0.5 percent to 10,207.63 and the S&P 500 climbed 14.15 points or 0.5 percent to 3,130.01.

For the holiday shortened week, the Dow surged up by 3.2 percent, the S&P 500 spiked by 4 percent and the tech-heavy Nasdaq soared by 4.6 percent.

The early rally on Wall Street came following the release of a closely watched Labor Department report showing another record spike in employment in the month of June.

The report said non-farm payroll employment skyrocketed by 4.8 million jobs in June after soaring by an upwardly revised 2.7 million jobs in May.

Economists had expected employment to surge up by about 3.0 million jobs compared to the spike of 2.5 million jobs originally reported for the previous month.

The Labor Department also said the unemployment rate dropped to 11.1 percent in June from 13.3 percent in May. The unemployment rate had been expected to dip to 12.3 percent.

The data initially added to optimism about an economic recovery, although a number of economists pointed out that the employment numbers are still well below pre-pandemic levels.

“The 4.8 million rise in non-farm payrolls in June provides further confirmation that the initial economic rebound has been far faster than we and most others anticipated,” said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, “But that still leaves employment 9.6% below its February level and with the spread of the virus accelerating again, we expect the recovery from here will be a lot bumpier and job gains far slower on average.”

A separate Labor Department report showing first-time claims for U.S. unemployment benefits fell by much less than expected in the week ended June 27th may also have limited the upside for the markets.

The Labor Department said initial jobless claims dropped to 1.427 million, a decrease of 55,000 from the previous week’s revised level of 1.482 million.

Economists had expected jobless claims to tumble to 1.355 million from the 1.480 million originally reported for the previous week.

The report also showed an increase in continuing claims, a reading on the number of people receiving ongoing unemployment assistance, which climbed by 59,000 to 19.290 million in the week ended June 20.

The late-day pullback by stocks may also have reflected concerns about the recent surge in new coronavirus cases headed into the holiday weekend.

In other U.S. economic news, the Commerce Department released a report showing the U.S. trade deficit widened more than expected in the month of May amid a steep drop in the value of exports.

Sector News

Despite the pullback by the broader markets, substantial strength remained visible among natural gas stocks, as reflected by the 3.2 percent jump by the NYSE Arca Natural Gas Index.

The strength in the natural gas sector came amid a notable increase by the price of the commodity, with natural gas for August delivery surging up $0.063 or 3.8 percent to $1.734 per million BTUs.

Chemical stocks also turned in a strong performance on the day, driving the S&P Chemical Sector Index up by 2.1 percent

Oil, semiconductor, and steel stocks also held on to strong gains, while gold stocks came under pressure over the course of the session.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index inched up by 0.1 percent, while China’s Shanghai Composite Index spiked by 2.1 percent.

The major European markets also showed strong moves to the upside on the day. While the U.K.’s FTSE 100 Index jumped by 1.3 percent, the French CAC 40 Index and the German DAX Index surged up by 2.5 percent and 2.8 percent, respectively.

In the bond market, treasuries moved modestly higher over the course of the session after an early slump. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.3 basis points to 0.669 percent.

Looking Ahead

Following the long holiday weekend, next week’s trading may be impacted by the latest news on the coronavirus front as well as reports on service sector activity and producer price inflation.

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