Huge rally - only in US Markets

Better than expected economic reports boost market sentiment ahead of crucial job report

After three consecutive days of drop, US Market rallied today, Thursday, 05 June 2008 riding on the effects of a couple of better than expected economic reports. Stocks rallied even though crude prices marked the highest one day gain in a long time after crude prices soared by almost $5.5/barrel. Leadership from the influential financial sector was a sustaining factor for the broader market. All the ten economic sectors ended in the green.

The major indices opened little higher but market soon zoomed up as the economic reports boosted market sentiments. At the end, the Dow Jones industrial Average ended the day with a gain of 214 points at 12,604. The Nasdaq Composite Index, finished higher by 46.8 points at 2,649. S&P 500 finished higher by 26.85 points at 1,404.05.

Twenty-seven out of thirty Dow stocks ended in the green today. Verizon together with Wal-Mart were the pacesetters for the Dow. Boeing, Pfizer and Caterpillar were the Dow laggards.

There were quite a few economic reports on the dock today. All were better than expected. First, retailers, led by Wal-Mart reported better-than-expected same-store sales for May. Wal-Mart was the headline leader in that respect, posting a 3.9% increase, excluding fuel. The company had forecast same-store sales to be flat to up 2%. For June Wal-Mart is expecting same-store sales to be up 2% to 4% due in part to an expected benefit from the spending of stimulus checks.

Secondly, the weekly initial claims data was better than expected and certainly not recession-like, as claims fell 18,000 to 357,000.

In the M&A arena, Verizon is reportedly going to buy privately-held Alltel for $28.1 billion. In the process, it will supplant AT&T as the biggest mobile phone operator in the country.

Financials got badly hammered today after headlines crossed the wires that Standard & Poor's was cutting its ratings on Ambac Financial and MBIA. Those stocks, and the market, suffered a knee-jerk dip, but regrouped in quick fashion.

Crude oil prices gained more than what they had lost in the previous two days as prices rallied and marked their largest one day gain in a long time today. A lower dollar prompted this sharp rise in crude price today. Crude has dropped $5.46 in the past two days and rose today by $5.49. Crude-oil futures for light sweet crude for July delivery today closed at $127.79/barrel (higher by $5.49/barrel or 4.5%) on the New York Mercantile Exchange. Prices haven't scored a gain anywhere near that large in a single day since at least 5 March of this year, when they climbed $5.

At the currency markets on Thursday, the dollar came under severe pressure, especially against the euro, after European Central Bank President Jean-Claude Trichet said a small increase in interest rates next month is possible. The dollar index, which tracks the greenback against a basket of six major currencies, was at 73.054, down from 73.469.

Volume topped 1.3 billion on the New York Stock Exchange, with advancing stocks topping decliners nearly 4 to 1. On the Nasdaq, 902 million shares changed hands, with advancers outrunning decliners nearly 3 to 1.

For tomorrow, the economic calendar focuses on the May employment report.