The Dow Jones Industrial Average and the S&P 500 index both hit new record highs on Thursday morning, but gave up their earlier gains and were trading in negative territory before the morning was out on Wall Street.
By Peter Martin
Thursday, April 3, 2014
The S&P 500 has set a handful of fresh highs so far this year, but the Dow Jones’ high of 16,604.15, attained in early trading Thursday, was the stock index benchmark’s first record high set in 2014.
The pullback is perhaps a sign of nerves starting to set in ahead of the most anticipated economic release this week (Friday’s official government employment data for March), though economic reports released on Thursday seem to demonstrate that the effects of bad weather on the economy abated in March.
Markit’s Purchasing Managers’ Index (PMI) for the services sector rose to 55.3 last month, better than expected and bouncing nicely from the 53.3. level seen in February, while the Institute of Supply Management’s non-manufacturing index also climbed in March, up 1.5 points to 53.1, including a huge rebound in the employment component, which snapped back 6.1 points to 53.6 after nose-diving in the previous month. While the increase in these measures are from weak comparative levels, they are likely to reassure investors that the economic softness pointed to by indicators at the beginning of the year was indeed a fleeting blip caused by unusually severe winter conditions.
Last week’s number of jobless claims was not so encouraging, though, with the number of first-time claimants for unemployment insurance rising to 326,000, from 310,000 in the week prior. This was within the range of forecasts from an Econoday survey of analysts, but above the consensus estimate. Despite this weekly worsening, the trend remains promising, with the four-week moving average remaining fairly stable at 319,500, close to 20,000 better than this measure was looking at the beginning of March.
In the commodity markets, natural gas futures for May surged 1.81% after the Energy Information Administration (EIA), the reporting arm of the Energy Department, said that natural gas in storage decreased 74 billion cubic feet (bcf) last week, following a withdrawal of 57 bcf the previous week. Total gas in storage is now just 822 bcf, some 992 bcf lower than the five-year average.
Gold slipped 0.19%. Safe-haven buying in light of tensions surrounding the Ukrainian crisis had helped support the precious metal in March, but as those tensions have eased, so gold’s price has declined. The solid reports on the services sector today does nothing to change expectations that the Fed will plough on with its QE exit strategy, reducing gold’s attractiveness as a store of value.
In the forex market, the euro weakened 0.43% against the dollar, taking the EUR/USD currency pair to its lowest level in a month after surprisingly dovish comments from European Central Bank (ECB) President Mario Draghi at his customary press conference following the ECB’s unchanged rate decision today.
Mr Draghi said the central bank expected a lengthy period of low inflation and pledged to take action, if needed, to combat deflation, revealing that quantitative easing had been considered at the meeting. ‘We are resolute in our determination to maintain a high degree of monetary accommodation and act swiftly if required,’ said Mr Draghi, adding that, ‘The Governing Council is unanimous in its commitment to using also unconventional instruments within its mandate in order to cope effectively with risks of a too prolonged period of low inflation.’
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