US stocks fight to gain altitude after Bank of England rate cut
New York (Aug 4) U.S. stocks struggled to defend gains on Thursday that were sparked by a decision by the Bank of England to cut its key interest rate for the first time in seven years. But mixed economic data at home capped the market’s upside.
The S&P 500 index SPX, +0.10% rose 2 points to 2,165. Support came from materials and technology stocks, helping to offset weak financials sector.
The Dow Jones Industrial Average DJIA, +0.03% climbed 4 points to 18,358, aided by Visa Inc.’s V, +1.18% 1.1% share gain.
The Nasdaq Composite Index COMP, +0.20% was up 10 points, or 0.2%, to 5,170.
“What we’re seeing is a market that is holding up but there are some underlying concerns that have investors on edge,” said Bob Pavlik, chief market strategist at Boston Private Wealth LLC.
The S&P 500’s strong gain in July as well as the oil’s pullback from its recent highs and hawkish comments from several Federal Reserve officials are among the factors contributing to lingering uncertainties, he added.
The Bank of England cut its lending rate by 25 basis points to a record low of 0.25%, which met market expectations. The central bank also said it would buy up to £10 billion ($13.18 billion) of corporate bonds and expand its quantitative-easing program by £60 billion to £435 billion.
Check out: Live blog of the Bank of England decision and press conference
The British pound GBPUSD, -1.5009% sank in the wake of the decision, while the FTSE 100 index UKX, +1.59% surged the most in five weeks. The yield on the benchmark 10-year U.K. government bond, or gilt TMBMKGB-10Y, -19.64% was driven to a record low.
The market “responded appropriately” to the bottom-line notion that “a central bank can only do so much,” said Diane Jaffee, senior portfolio manager at TCW. The BOE’s decision was a step in the right direction but investors are still focusing on the remaining political uncertainty, Jaffee added.
Meanwhile, in the U.S., the number of people who applied for first-time unemployment benefits rose by 3,000 to 269,000 last week, marking the highest level since the end of June, though claims still point to a healthy labor market. And factory orders fell 1.5% in June, the second consecutive sharp decline, the Commerce Department reported Thursday.
The mixed economic data came a day ahead of the July nonfarm-payrolls report, which could be pivotal for the Federal Reserve’s future monetary policy.
“Ahead of tomorrow’s July payroll report, the pace of firings remains modest,” said Peter Boockvar, chief market analyst at The Lindsey Group. However, “a benign pace of firings doesn’t contradict a slowing rate of job growth,” Boockvar said.
Recent data has made it evident that “there’s just not enough juice in the U.S. economy” to warrant a rate increase, said Peter Cardillo, chief market economist at First Standard Financial Company.
More important, the BOE decision will make it harder for the Fed to raise rates, Cardillo said.
Eyes on oil: Investors were closely watching gyrations in oil prices, after a rally in crude futures helped the Dow industrials gain on Wednesday.
“Oil has once again established itself as the central thematic behind the world’s financial markets and the fact we saw such a powerful reversal at the trend low, despite U.S. dollar strength, has driven a slight uplift in sentiment,” said Chris Weston, chief market strategist at IG, in a note.
On Thursday, crude-oil futures CLU6, +2.40% were choppy. Bulls struggled to build on a Wednesday bounce that came after the Energy Information Administration data reported a surprise 3.3 million-barrel fall in gasoline inventories.