Stocks Come Off Highs but Remain on Track for Record Close

The S&P 500 comes off session highs by Thursday afternoon, though remains on track for a record close for the fourth time this week.
By Keris Alison Lahiff ,

The S&P 500 came off session highs by Thursday afternoon, though remained on track for a record close for the fourth time this week.

The benchmark index gained 0.56%, the Dow Jones Industrial Average climbed 0.8%, and the Nasdaq added 0.6%. Thursday marks the fifth day of gains.

The S&P 500 and Dow clinched new record closes on Wednesday, though just barely, after a day of wavering between gains and losses. New records were also made on Monday and Tuesday after a better-than-expected U.S. jobs report brought relief over the state of the U.S. economy.

The Bank of England opted to leave its key interest rate at 0.5% in the first monetary decision since the United Kingdom voted to exit the European Union. The central bank also held steady on its 375-billion-pound asset purchase program, though suggested it might be ready to increase stimulus next month. Global traders had expected members to decide upon a rate cut for the first time since 2009.

"In the absence of a further worsening in the trade-off between supporting growth and returning inflation to target on a sustainable basis, most members of the Committee expect monetary policy to be loosened in August," the central bank said in a statement.

Hopes are high the Bank of Japan could implement another source of stimulus in a strategy called helicopter money, wherein the central bank would directly fund government spending. The BOJ already purchases government bonds as a means of monetary stimulus. Its quantitative and qualitative easing program has been in place since 2013.

Crude oil prices recaptured a level above $45 a barrel on Thursday, rebounding after a major selloff a day earlier. Commodities had sold off on Wednesday after a weekly read on U.S. inventories showed a smaller-than-expected decline. 

West Texas Intermediate rose 2.1% to close at $45.68 a barrel on Thursday. 

Prices of produced goods in the U.S. rose 0.5% in June, according to the Bureau of Labor Statistics. Economists had expected a 0.3% increase. Excluding food and energy, core prices rose 0.3%.

"Core prices have moved up from their late-2015 lows (as impact of the strong dollar abated some) but have since been moving mostly sideways," said RBS' John Hoff in a note.

The number of new claims for unemployment benefits remained unchanged at 254,000 in the past week, another sign of a strong labor market. The less-volatile, four-week average fell 5,750 to 259,000.

Markets are pricing in one interest rate hike in the U.S. at the most in 2016, but Philadelphia Federal Reserve President Patrick Harker said the central bank could raise two times before the end of the year. In May, Harker predicted two to three increases this year. Harker said the U.S. economy is on "fairly firm footing" during an event in Philadelphia Wednesday evening.

Atlanta Fed President Dennis Lockhart added to rate hike discussion on Thursday, noting that the Brexit decision had muddied the U.S. economic outlook. Lockhart said he was "comfortable with a cautious and patient approach to policy in the near term" during a speech in Idaho. 

Monsanto (MON) spiked nearly 3% by mid-afternoon Thursday after Bayer (BAYRY) - Get Report upped its bid to $125 a share from $122. The all-cash deal values Monsanto at roughly a 20% premium to its current trading levels. 

JPMorganChase (JPM) - Get Report climbed after beating profit estimates for its second quarter. The bank earned $1.55 a share over the quarter, 12 cents above forecasts. Revenue rose to $25.21 billion, higher than an expected $24.16 billion.

Railroad operator CSX (CSX) - Get Report also topped reduced earnings estimates, even as profit slumped in the double digits. The company earned an adjusted 47 cents a share, 3 cents higher than consensus. Profit slumped 20% as freight volume declined 9%. Lower commodity prices have hit volume transported in recent quarters.

Delta Air Lines (DAL) - Get Report reported a mixed quarter with profit exceeding estimates and sales falling short. The airline earned an adjusted $1.47 a share, a nickel above consensus. Revenue fell 2% to $10.45 billion, below an expected $10.48 billion.

BlackRock (BLK) - Get Report was slightly lower as quarterly profit took a tumble. The money manager said recent political and economic uncertainty had led clients to take a pause. BlackRock earned an adjusted $4.78 a share, a penny above forecast but below $4.96 a year earlier.

Yum! Brands (YUM) - Get Report  increased its profit forecast for the full year thanks to a rebound in China. The owner of KFC reported a 3% increase in system sales in China, a region that accounts for around half of total revenue. The company hiked its full-year operating profit growth forecast to 14% from 12%, pointing to improved trends in China. The Kentucky-based company expects to complete a spinoff of its China business by the end of October.

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