(RTTNews) - After showing some initial weakness, stocks showed a substantial turnaround over the course of morning trading on Thursday. While the major averages were more or less rangebound for the remainder of the session, they still ended the day firmly in positive territory.

While the early weakness came as traders reacted to some negative economic and corporate news, retail sales data that was not as bad as expected and some bargain hunting fueled the advance later in the day.

Stocks initially moved lower after the Labor Department’s weekly jobless claims report showed that first-time claims for unemployment benefits unexpectedly jumped to their highest level in over twenty-six years in the week ended January 31st.

The report showed that initial jobless claims rose to 626,000 from the previous week’s revised figure of 591,000. Economists had expected jobless claims to edge down to 580,000 from the 588,000 originally reported for the previous week.

Additionally, the Commerce Department’s monthly report on factory orders was released shortly after the market open and showed a bigger than expected 3.9 percent decrease in orders in December. This marked the fifth consecutive monthly decrease in orders.

In an interview with RTT News, Paul Nolte, director of investments at Hinsdale Associates said that the weak economic reports released earlier were not surprising, adding that data would continue to be poor for much of the year.

“We are in the worst part of the economic cycle at this point,” Nolte said, predicting that moderation in the data won’t occur until at least the end of the year.

In terms of the market, Nolte said we are in the early phases of putting in a bottom, reminding investors that it’s a process, not an event. Though he predicted a lot of volatility and possibly lower levels this year, Nolte said he is “absolutely buying the dips.”

In other news, Minneapolis Federal Reserve President Gary Stern spoke at the Capital City Partnership Annual Meeting in St. Paul, Minnesota on Thursday, offering a sliver of hope that actions by the Federal Reserve could help stabilize the financial markets.

Although the economy is likely to remain in recession for at least two more quarters, Stern predicted that healthy growth would return by the middle of 2010.

“In view of the state of the credit markets and of the housing sector, it seems a fair bet that it will take time for momentum to build,” Stern said in prepared remarks. “But with the passage of time - as we get into the middle of 2010 and beyond - I would expect to see a resumption of healthy growth.”

The major averages ended the session firmly in positive territory, although off their best levels of the day. The Dow closed up 106.41 points or 1.3 percent at 8,063.07, the Nasdaq closed up 31.19 points or 2.1 percent at 1,546.24 and the S&P 500 closed up 13.62 points or 1.6 percent at 845.85.

Sector News

A variety of sectors showed strong upward move over the course of the trading day, reflecting the broad based strength that emerged in the markets.

Health insurance stocks posted some of the strongest gains of the day, with a 18.7 percent gain by Cigna (CI) helping to drive the Morgan Stanley Healthcare Payor Index up 4.9 percent. Cigna ended the session at a three-month high after reporting better than expected earnings.

Significant strength was also visible in the semiconductor sector, as reflected by the 4 percent gain posted by the Philadelphia Semiconductor Index. Among semiconductor stocks, Marvell Technology (MRVL) closed up 5.2 percent after being upgraded to Buy at Goldman Sachs.

Oil service stocks also showed noteworthy strength, with the Philadelphia Oil Services Index posting a gain of 4 percent at the close. The strength was likely fueled in part by an increase by the price of oil, which closed up $0.85 at $41.17 a barrel.

Similarly, natural gas and gold stocks also posted notable gains amid increases in the prices of their related commodities. The Amex Natural Gas Index closed up 2.7 percent, while the Amex Gold Bugs Index closed up 1.5 percent.

As mentioned above, a number of other sectors also turned in strong performances, with some steel and healthcare provider stocks posting notable gains.

At the other end of the spectrum, real estate stocks were some of the only noteworthy losers on the day. The Morgan Stanley REIT Index ultimately closed down 2 percent.

Dow Components

Pushing the blue chip average to its notable advance by the close of trading, a vast majority of the Dow components closed Thursday’s session in positive territory.

Wal-Mart (WMT) turned in one of the Dow’s best performances, with the retail giant closing up 4.6 percent after ending the previous session at its worst closing level in over a year. The gain came after the company announced its sales results for January.

Shares of American Express (AXP) also showed a strong upward move, closing up 4.1 percent. The credit company moved higher along with peers Visa (V) and MasterCard (MA), which posted gains of 9.4 percent and 14.1 percent, respectively, after reporting their quarterly results.

General Motors (GM) also posted a notable gains, ending the session up 5.2 percent, while Alcoa (AA) and Home Depot (HD) both closed up 3.1 percent.

At the other end of the spectrum, Hewlett-Packard (HPQ) was one of the biggest losers, closing down 2.6 percent on the day. The weakness in Hewlett-Packard came as Dell (DELL) fell 4 percent after being downgraded to Underweight from Neutral at J.P. Morgan.

General Electric (GE) and Disney (DIS) also suffered significant losses, closing down 3.6 percent and 1.5 percent, respectively.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region ended Thursday’s session lower as investors reacted to overnight weakness on Wall Street. Japan’s benchmark Nikkei 225 index fell 1.1 percent.

Meanwhile, the major European markets ended the day mixed after seeing notable weakness for much of the session. While the German DAX Index closed up 0.4 percent and the U.K.’s FTSE 100 Index posted a slight gain, the French CAC 40 Index closed down 0.1 percent.

In the bond market, treasuries closed above the unchanged line after showing a lack of direction during the trading session. Subsequently, the yield on the benchmark ten-year note closed down 1.6 basis points at 2.898 percent.

Looking Ahead

On Friday, traders will likely draw their primary influence from the results of the monthly jobs report from the Labor Department. Economists anticipate a loss of more than 500,000 jobs and an unemployment rate of 7.5 percent.

In corporate news, earnings releases from News Corp. (NWS), VeriSign (VRSN) and Millipore Corp. (MIL) are due after the closing bell on Thursday, while Biogen Idec (BIIB), TECO Energy (TE), and Weyerhaeuser (WY) are expected to release quarterly results before Friday’s open.

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Posted in Categories: Economy, Eurozone, Japan, Releases, USA.

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