Progress On Debt Ceiling Bill Contributes To Strength On Wall Street

Stocks showed a lack of direction in early trading on Thursday but moved notably higher over the course of the session. With the upward move on the day, the Nasdaq and the S&P 500 reached their best closing levels in over nine months.

The major averages pulled back off their highs of the session going into the close but remained firmly positive. The Nasdaq surged 165.70 points or 1.3 percent to 13,100.98, the S&P 500 jumped 41.10 points or 1.0 percent to 4,221.02 and the Dow climbed 153.30 points or 0.5 percent to 33,061.57.

The strength that emerged on Wall Street came after the House voted Wednesday night to approve the bill raising the U.S. debt ceiling.

The House voted 314 to 117 in favor of the Fiscal Responsibility Act, with the legislation attracting support from both Democrats and Republicans.

The legislation now heads to the Senate, where Majority Leader Chuck Schumer, D-N.Y., said he hopes lawmakers can work quickly and bring the bill to the president’s desk “as soon as possible.”

Schumer said the Senate would remain in session until the bill is passed and warned lawmakers would be risking a default by trying to amend the legislation and send it back to the House.

“The deal is now in the Senate’s hands and the question is not if they will pass the bill but on when they will get it done,” said Edward Moya, senior market analyst at OANDA.

“Majority Leader Schumer noted they are trying to get it done as soon as possible,” he added. “A vote could happen today as lawmakers signal they are going to try to restrict amendments.”

Stocks gave back ground late in the session amid news a dispute over defense spending could delay the passage of the ceiling bill.

On the U.S. economic front, payroll processor ADP released a report showing private sector employment in the U.S. jumped by much more than expected in the month of May.

The report said private sector employment shot up by 278,000 jobs in May after surging by a revised 291,000 jobs in April.

Economists had expected private sector employment to increase by 170,000 jobs compared to the spike of 296,000 jobs originally reported for the previous month.

Meanwhile, the Labor Department released a report showing a slight increase in first-time claims for U.S. unemployment benefits in the week ended May 27th.

The report said initial jobless claims crept up to 232,000, an increase of 2,000 from the previous week’s revised level of 230,000.

Economists had expected jobless claims to rise to 235,000 from the 229,000 originally reported for the previous week.

The Institute for Supply Management also released a report showing U.S. manufacturing activity contracted at a slightly faster rate in the month of May.

The ISM said its manufacturing PMI slipped to 46.9 in May from 47.1 in April, with a reading below 50 indicating a contraction. Economists had expected the index to edge down to 47.0.

Sector News

Oil service stocks moved sharply higher over the course of the session, resulting in a 4.0 percent spike by the Philadelphia Oil Service Index. The index bounced off its lowest closing level in over seven months.

The rebound by oil service stocks came amid a surge by the price of crude oil, with crude for July delivery jumping $2.01 to $70.10 a barrel.

Substantial strength was also visible among computer hardware stocks, as reflected by the 3.6 percent gain posted by the NYSE Arca Computer Hardware Index.

Pure Storage (PSTG) helped lead the sector higher after the data storage company reported better than expected fiscal first quarter earnings and provided upbeat full-year guidance.

Gold stocks have also showed a strong move to the upside amid an increase by the price of the precious metal, driving the NYSE Arca Gold Bugs Index up by 3.5 percent.

Steel, tobacco, airline and banking stocks also saw considerable strength on the day, while utilities stocks were among the few groups to buck the uptrend.

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 advanced by 0.8 percent, while Hong Kong’s Hang Seng Index edged down by 0.1 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index jumped by 1.2 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index both climbed by 0.6 percent.

In the bond market, treasuries extended the upward move seen over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.9 basis points to 3.608 percent.

Looking Ahead

Trading on Friday is likely to be driven by reaction to the monthly jobs report, which could impact the outlook for interest rates.

Economists currently expect employment to increase by 190,000 jobs in May after jumping by 253,000 jobs in April, while the unemployment rate is expected to inch up to 3.5 percent from 3.4 percent.

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