U.S. Stocks Move Mostly Higher Following Encouraging Inflation Data

Stocks have moved mostly higher in morning trading on Thursday, with the major averages moving back to the upside after ending yesterday’s extremely volatile session in negative territory. The tech-heavy Nasdaq has helped lead the advance.

In recent trading, the major averages have reached new highs for the session. The Nasdaq is up 161.80 points or 1.4 percent at 12,091.14, the S&P 500 is up 26.83 points or 0.7 percent at 4,118.78 and the Dow is up 124.72 points or 0.4 percent at 33,771.22.

The strength on Wall Street comes following the release of a report from the Labor Department showing an unexpected decrease in U.S. producer prices in the month of March.

The Labor Department said its producer price index for final demand fell by 0.5 percent in March following a revised unchanged reading in February.

Economists had expected producer prices to come in unchanged compared to the 0.1 percent dip originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed dramatically to 2.7 percent in March from 4.9 percent in February. Economists had expected the pace of growth to slow to 3.0 percent.

Combined with yesterday’s tamer-than-expected consumer price inflation data, the report has helped ease concerns about inflation and the outlook for interest rates.

“The link between the PPI and CPI is not as clear as it once was, but persistently small increases — or, as in March, an outright decline — will eventually come through to consumers if demand slows enough to prevent companies from taking out the slack in the form of higher margins,” said Chris Low, chief economist at FHN Financial.

He added, “For a Fed already inclined to pause, this report tips the scale just a bit more in favor, especially after yesterday’s CPI failed to reveal any new inflationary problems.”

A separate Labor Department report showed first-time claims for U.S. unemployment benefits rose by more than expected in the week ended April 8th.

The report said initial jobless claims climbed to 239,000, an increase of 11,000 from the previous week’s unrevised level of 228,000. Economists had expected jobless claims to rise to 232,000.

Sector News

Gold stocks have moved sharply higher on the day, driving the NYSE Arca Gold Bugs Index up by 2.9 percent to an eleven-month intraday high.

The rally by gold stocks comes amid a sharp increase by the price of the precious metal, with gold for June delivery surging $36.10 to $2,061 an ounce.

Significant strength has also emerged among telecom stocks, as reflected by the 1.7 percent gain being posted by the NYSE Arca North American Telecom Index. The index has reached its best intraday level in well over a month.

Software, biotechnology and retail stocks are also seeing considerable strength on the day, while transportation stocks have moved to the downside.

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 rose by 0.3 percent, while China’s Shanghai Composite Index dipped by 0.3 percent.

The major European markets have also turned mixed on the day. While the German DAX Index is down by 0.2 percent, the U.K.’s FTSE 100 Index is up by 0.1 percent and the French CAC 40 Index is up by 0.8 percent.

In the bond market, treasuries are seeing further upside after ending yesterday’s volatile session modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.3 basis points at 3.398 percent.

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