INVESTORS betting on a big gain in US payrolls pushed Wall Street to its best one-day rally in three months yesterday, but weak volume remained a concern.
As oil paused from its recent climb, the market’s focus shifted to stronger-than-expected economic data a day before the February US employment report. The median estimate is for a gain of 185,000 jobs, according to economists polled by Reuters, but market sentiment was leaning toward a number above 200,000, traders said.
“There are still concerns about high oil prices but the bottom line is, the US economy is improving. We continue to get confirmations of that, and it’s a good sentiment heading into Friday’s numbers,” said Ryan Detrick, technical analyst at Schaeffer’s Investment Research in Cincinnati, Ohio.
The Dow Jones industrial average closed up 191.40 points, or 1.59 per cent, at 12,258.20. The Standard & Poor’s 500 Index finished up 22.53 points, or 1.72 per cent, at 1,330.97. The Nasdaq Composite Index was up 50.67 points, or 1.84 per cent, at 2,798.74.
The Dow and S&P 500 posted their biggest one-day gains since December 1. However, volume was below average for days when the market rallies, causing some traders to be sceptical about the durability of the rally.
About 7.81 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below last year’s daily average of 8.47 billion.
The put-to-call ratio in the options market also didn’t change much despite the day’s rally as traders continued to hedge against a potential drop in the market.
“As much as investors are excited about a pullback so that they can jump in, they are just as concerned about how quickly this market can turn,” Detrick said.
Initial jobless claims fell last week to 368,000 – a two-and-a-half year low – one day after a robust report on private-sector hiring. The Institute for Supply Management's non-manufacturing index rose to 59.7 in February, slightly above forecasts and higher than the January result.
Industrial stocks led the market higher, boosted by a weaker dollar and an improving outlook for global demand. The S&P industrial index gained 2.4 per cent, with Caterpillar up 3.2 per cent to $104.25.
Stocks have shown resilience in the face of economic headwinds. The broad S&P 500 is down only about one per cent from a peak in late February after falling around three per cent due to growing violence in oil-producer Libya. The Arab League said yesterday a peace plan for Libya was under consideration.