One day after the Federal Reserve signaled a slow-and-steady approach to tapering fixed-income asset purchases, it was up and away for the S&P 500 (SPX), says Jon Markman, growth-stock specialist and editor of Strategic Advantage.
The benchmark soared to 4,438, a gain of 1.7%. That is enough to retake the 50-day moving average. It means bulls are again in control of short-term momentum and the probable start of the year-end rally.
Strength was broad Thursday, yet the most interesting development was the renewed leadership of tech. Communications and Information Technology comprise 39% of the benchmark S&P 500. If these groups are strong, market weakness becomes improbable.
Moreover, the rally to new highs could occur faster than anyone expects because of short-covering and the urgent need to invest by cash-heavy funds that were waiting for a bigger decline.
The next upside objective is the record high at 4,536. Support remains at 4,257.
The Dow Jones Industrial Average was up 1.6% to 34,912 and the Nasdaq Composite advanced 1.7%. Materials and technology led the sectors, which were all in the green. The 10-year US Treasury yield fell three basis points to 1.52%. West Texas Intermediate crude oil rose 1.3% to $81.47 a barrel. Advancers beat decliners by a 3-1 margin and there were 311 new highs vs. 59 new lows.
In economic news, initial jobless claims fell by 36,000 to 293,000 in the week ended Oct. 9 against market expectations of 320,000 first-time claims—the lowest since the start of the Covid-19 pandemic.
The Producer Price Index rose 0.5% in September, less than the 0.6% increase expected after a 0.7% rise in August. Energy prices rose 2.8% and food prices increased 2%, but core producer prices excluding food and energy rose only 0.2%, well below the 0.5% gain expected.
Commercial crude oil inventories surged by 6.1 million barrels after a gain of 2.3 million barrels in the previous week, much more than the increase of 1.1 million barrels forecast in a Bloomberg survey.