Thursday Stock Market Close: US Equities Surge, Extending 2019 Rally Into New Year

U.S. stocks extended the rally from 2019 by soaring on the first trading day of the new year after China’s central bank released billions of dollars into its financial system.

The Dow Jones Industrial Average gained 330.7 points to 28,869.14 while the S&P 500 rose 27.12 points to 3,257.90 and the Nasdaq Composite Index added 119.58 points to 9029.67

Nasdaq received a big boost from an exceptional performance by semiconductor stocks, like Advanced Micro Devices (AMD) which climbed 6.6% on Thursday.

Volume on the New York Stock Exchange totaled 2.78 billion shares with 1,752 issues advancing, 203 setting new highs, and 1,199 declining, with 5 setting new lows.

Active movers were led by FuelCell Energy Inc. (FCEL), NIO Inc. (NIO) and Advanced Micro Devices (AMD).

“We’re starting the year off on the sunny side,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “Besides the geopolitical tensions, the focus remains on the macro news which has been consistent and points to growth ahead.”

The Chinese central bank, the People's Bank of China, said that it will reduce its reserve requirement ratio for all banks by 0.5%, effective Jan. 6, thereby releasing more than 800 billion yuan ($114.9 billion) into its financial system. Last month, Chinese Premier Li Keqiang vowed to stimulate more bank loans to the country's struggling small companies.

“China has been central to the rally in global stocks in recent weeks as last month it was revealed that Beijing and Washington D.C., agreed [on] phase one of the trade deal,” David Madden, market analyst at CMC Markets

President Donald Trump on Tuesday said the phase-one trade deal with China will be signed on Jan. 15 at a ceremony at the White House. He said he will later fly to Beijing to begin talks on phase two.

“Bottom line, to use an old marketing analogy, in 2019 markets were successfully sold on the ‘sizzle’ that the trade truce and rate cuts will cause a global economic reflation,” said Tom Essaye, president of the Sevens Report. “Now, in 2020, it’s time to try the steak.”

Initial jobless claims decreased by 2,000 to a seasonally adjusted 222,000 for the week ended Dec. 28, the Labor Department said on Thursday. Economists had forecast 225,000 new claims for last week.

The IHS Markit's Manufacturing Purchasing Managers Index came in at 52.4 in December, following November's 52.6 reading.

"U.S. manufacturing sector continued to recover from the soft-patch seen in the summer, ending 2019 with its best quarter since the early months of 2019," said Chris Williamson, chief business economist at IHS Markit. "The overall rate of expansion nevertheless faltered somewhat in December and remains well below that seen this time last year, suggesting producers are starting 2020 on a softer footing than they had enjoyed heading into 2019."

“One of the biggest risks today may be that stocks have already priced in much of the good news,” said Bob Doll, senior portfolio manager at Nuveen Asset Management. “Stock prices can still climb higher, but we don’t expect results anywhere near 2019.”

“Equities begin [2020] on firm ground building on the momentum from last year,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities, in a note. “[But] it’s hard to imagine 2020 offering the same type of returns of last year.”

Overnight in Asia, markets finished mixed. China’s Shanghai Composite surged 1.15%, while Hong Kong’s Hang Seng jumped 1.25%, but Japan’s Nikkei-225 dropped 0.76%.

In Europe markets traded higher, with Britain’s FTSE-100 up 0.99%, France’s CAC-40 up 1.02% and Germany’s DAX surging 1.25%.

Crude oil futures rose 0.11% at $61.13 per barrel and Brent crude dipped 0.06% at $66.21. Gold futures gained 0.48%.

The euro fell 0.82% at $1.1172 while the pound sterling dropped 0.82% at $1.3141.

The yield on the 10-year Treasury dropped 1.93% to 1.882% while yield on the 30-year Treasury fell 2.01% to 2.341%.