By Lawrence Delevingne
BOSTON (Reuters) – U.S. stocks and oil prices rebounded on Thursday as unemployment claims declined and the trade deficit widened, positive economic data in the face of rising COVID-19 cases and signals of declining Federal Reserve stimulus.
The number of Americans filing new claims for unemployment benefits declined further last week, while layoffs dropped in July to their lowest level in just more than 21 years.
The U.S. trade deficit surged to a record high in June as businesses boosted imports to rebuild inventories.
The Dow Jones Industrial Average rose 197.37 points, or 0.57%, to 34,990.04, the S&P 500 gained 18.01 points, or 0.41%, to 4,420.67 and the Nasdaq Composite added 99.08 points, or 0.67%, to 14,879.61.
“Yesterday’s record high reading on the Services PMI and today’s unemployment claims data have reinvigorated confidence on the economic growth front,” Dave Donabedian, chief investment officer of $92 billion CIBC Private Wealth U.S., wrote in an email.
A measure of U.S. services industry activity jumped to a record high in July, boosted by the shift in spending to services from goods.
“Investors definitely are keeping an eye on the Delta variant, but mostly view it as a speed bump for the economy rather than a showstopper.”
Goldman Sachs market strategists raised their year-end and 2022 price targets for the S&P 500 Index, citing “the combination of higher-than-expected S&P 500 earnings and lower-than-expected interest rates.”
Still, investors want to know how low rates will stay, and for how long.
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On Wednesday, U.S. Federal Reserve Vice Chair Richard Clarida, a major architect of the Fed’s new strategy, said he felt conditions for raising interest rates could be met by the end of 2022, raising expectations that the central bank could scale back its bond-buying program soon.
A key indicator is due on Friday with the U.S. non-farm payrolls report, seen as key to the U.S. central bank’s policy stance.
The dollar held gains against a basket of currencies in morning trade the day after Clarida’s hawkish remarks, trading around 92.235 after hitting an eight-day high of 92.352.
U.S. Treasury yields rose slightly, as traders waited for more detailed employment data due on Friday.
Benchmark 10-year notes yielded around 1.2152%, up from 1.184% late on Wednesday.
Oil prices rose more than 1% on increasing Middle East tensions.
U.S. crude recently rose 1.19% to $68.96 per barrel and Brent was at $71.16, up 1.11% on the day.
Gold fell to test the pivotal $1,800 support level, with spot gold down 0.4% to $1,804.66 an ounce. U.S. gold futures fell 0.44% to $1,802.60 an ounce.
(Reporting by Lawrence Delevingne; Editing by Will Dunham and David Gregorio)
