MarketView for March 14

Summary

The Dow Jones Industrial Average extended its winning streak to 10 days on Thursday, a string of gains last seen in late 1996, as it closed out the day at another record high the result of data indicating that the labor market continues to improve.

The S&P 500 took a late-day run at its record closing high of 1,565.15, but ended just 2 points away. All the while the Dow has been setting record highs since last week, when it rallied on March 5 to initially surpass its previous lifetime closing peak set in October 2007.

The equities markets have accelerated their upward trend without any sort of a consolidation since the start of the year, driven by improvement in the economy and the Federal Reserve's continuation of its easy monetary policy. After only three months into the year, the Dow is up nearly 11 percent while the S&P 500 has gained 9.6 percent. During the day on Thursday, the Dow set another lifetime intraday high at 14,539.29.

Thursday’s data on new unemployment claims continued to support the theory that the labor markets are on the mend as the number of filings for new unemployment benefits fell for the third week in a row.

In other economic data, the Labor Department reported that its Producer Price Index (PPI) rose in February by the most in five months as gasoline prices rose sharply. At the same time, there was little or no indication of a broader increase in inflation pressures that could force the Fed to tighten monetary policy.

Ten of the Dow's 30 stocks hit at least 52-week highs, including Disney. IBM rose to a lifetime intraday high of $215.85, and closed at $215.80, up 1.8 percent.

Energy shares led the Dow and the S&P 500 higher. Chevron was among the Dow's largest percentage gainers, rising 1.4 percent to $120, after earlier hitting a fresh 52-week intraday high of $120.26.

After the bell, the Federal Reserve released scores for 18 U.S. bank holding companies that show how low their capital ratios would fall under proposed plans for dividends and stock buybacks if "severely adverse" economic conditions unfolded over the next two years.

JPMorgan Chase fell 2 percent in extended-hours trading while Goldman Sachs was down 1.9 percent. During the regular session, Apple rose 1 percent to $432.50 as its rival Samsung Electronics launched the latest Galaxy phone in New York on Thursday.

Shares of eBay rose1.6 percent to $51.80 after Evercore Partners raised its rating to "overweight." However, on the downside, shares of Amazon fell 3.4 percent to $265.74 after JPMorgan cut its rating on the stock to "neutral" from "overweight" and lowered its price target to $300 from $333.

E*Trade lost 8.2 percent to $10.85 after Citadel LLC, its largest investor, said it is selling its entire stake in the discount brokerage and bank company.

Volume was below average, with roughly 6 billion shares changing hands on the three major equity exchanges as compared with the 2012 average daily closing volume of about 6.45 billion shares.

Jobless Claims Improve Substantially

The number of Americans filing new claims for unemployment benefits fell for a third straight week last week, the latest indication the labor market recovery was gaining traction. The claims report added to a range of data, from retail sales to manufacturing and employment, that have suggested a limited impact on the economy from higher taxes.

Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 332,000 last week, the Labor Department said. The four-week moving average for new claims, a better measure of labor market trends, fell to a five-year low, suggesting a firming in underlying labor market conditions.

While signs of strength in the jobs market could intensify an already lively debate at the Fed on the future course of monetary policy, the Fed is unlikely to scale back its monetary stimulus.

Policymakers meet next week to assess the economy and are widely expected to keep purchasing $85 billion in bonds per month in an effort to spur even stronger economic growth. It has said the Fed would keep up asset purchases until it saw a substantial improvement in the labor market outlook.

While employment growth has picked up in recent months that is more a reflection of a decrease in layoffs than a pickup in hiring. In February, nonfarm payrolls increased by a healthy 236,000, but economists said that is not enough to satisfy the U.S. central bank.

A government report on Tuesday showed layoffs in January were the lowest on records dating to 2000, while the pace of hiring held steady.

In the 12 months through February, this so-called core PPI was up 1.7 percent, the smallest rise since January 2011.

While gasoline prices pushed up producer prices last month, they have started to fall from their lofty levels. This should keep inflation under wraps and boost consumer purchasing power.