Dow back over 15,000 on upbeat data and Fed reassurance

stocks

JeeYeon Park CNBC

4 hours ago

Stocks were sharply higher on Thursday, thanks to better-than-expected reports on unemployment, home sales and consumer spending, as well as reassuring comments from Federal Reserve policymakers, who said markets had overreacted to the Fed's recent policy statements.

(Read More: US Economy Could Grow 5% in Late 2014: Fund Manager)

The Dow Jones Industrial Average was 130 points higher in early afternoon trading, regaining its footing above the psychologically-significant 15,000-point level and looking to log its first three-day rally since late April. The blue-chip index has seen triple-digit moves in 15 of the 19 trading sessions in the month of June, the most in a month since October 2011.

The S&P 500 and the Nasdaq were also sharply higher. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, slid below 17.

All key S&P sectors were in positive territory, led by telecoms and financials.

Upbeat economic data from China also helped bolster sentiment. Industrial profits unexpectedly rose 15 percent in May year-on-year, defying expectations of a slowdown. Japan's Nikkei rallied nearly 3 percent, logging its biggest percentage gain in 13 sessions, while the Shanghai Composite Index finished flat.

"Any China data carries significant weight these days as investors are desperate for signs that the world's second biggest economy is still ticking along," wrote Stan Shamu, market strategist at IG.

On the economic front, weekly jobless claims fell 9,000 last week to a seasonally adjusted 346,000, according to the Labor Department, largely in line with expectations. The four-week moving average for new claims fell 2,750 to 345,750. And consumer spending rebounded 0.3 percent in May, matching estimates, after a revised 0.3 percent decline in the prior month, according to the Commerce Department.

Treasury prices extended their gains as yields tumbled to session lows following the data.

(Read More: Why All the Bond Selling Hysteria May Be Overdone)

"I think it makes the Fed even more confident that they're doing the right thing," said Drew Matus, senior U.S. economist and managing director at UBS. "And if you look at these numbers, they suggest that the second quarter's going to be better than the first quarter."

Also, pending home sales for May soared 6 percent to hit a six-year high, according to the National Association of Realtors.

New York Fed president William Dudley said the central bank's asset purchases would be more aggressive than the timeline Chairman Ben Bernanke outlined last week if economic growth and the labor market turn out weaker than expected.

Dudley added that the recent market forecasts for an earlier rate gain are "quite out of sync" with the statements and expectations of the policy-making Federal Open Market Committee. Dudley is a voting member of the FOMC.

Fed Board Governor Jerome Powell agreed that markets over-reacted to the central bank's statements on tapering off its stimulus package.

"Market adjustments since May have been larger than would be justified by any reasonable reassessment of the path of policy," Powell said in a speech. "To the extent the market is pricing-in an increase in the federal funds rate in 2014, that implies a stronger economic performance than is forecast either by most FOMC participants or by private forecasters."

Markets have been fixated on Fed commentary this week, after Bernanke said last week that the central bank could begin to wind down its $85 billion monthly bond purchases before the end of the year. That sent already rising yields higher and sent stocks on a roller-coaster ride.

Atlanta Fed President Dennis Lockhart was also expected to speak later on Thursday.

In addition, the Treasury will auction $29 billion in 7-year notes later. The auction follows a $35 billion 5-year auction Wednesday and a $35 billion 2-year auction Tuesday, both with anemic results.

"The results for the 2- and 5-year do not bode well for the 7-year tomorrow," said Ian Lyngen, senior Treasury strategist at CRT Capital, speaking on Wednesday. "There's limited risk appetite ahead of the end of the quarter."

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