Lately, the stock market has gyrated wildly, succumbing to bouts of depression and then following them with euphoric rises. On Thursday morning, stocks definitely reflected rising optimism among investors. Favorable reports on the labor market and a rebound in oil prices are indicating that concerns about the potential effect of macroeconomic factors on the stock market have been overblown. At 10:50 a.m. EST, the Dow Jones Industrials (DJINDICES:^DJI) were up 160 points, adding to the 500 points' worth of gains the average posted during the first three days of the week.
The Dow's biggest gainer was drug giant Pfizer (NYSE:PFE), which climbed 3% after making a deal to buy Hospira (UNKNOWN:HSP.DL) for $90 per share in cash. The $17 billion deal values the maker of injectable drugs and biosimilar treatments at a premium of almost 40% compared to where Hospira closed Wednesday afternoon, reflecting the strong recent interest in strategic combinations within the healthcare space. With the deal expected to increase Pfizer's earnings per share within the first year after closing, Pfizer investors seem pleased that the drug giant is pursuing new strategies for growth after taking efforts to downsize its business in recent years, including the spinoff of animal-health specialist Zoetis and the sale of its $12 billion nutrition business to Nestle.
Yet beyond company-specific news, investors remain interested in broader-reaching aspects of the economy. Most major energy stocks rose modestly as crude oil prices reversed course yet again, climbing back above the $50-per-barrel level with a nearly 4% gain. Still, those who follow the energy markets largely expect oil prices to oscillate violently for the foreseeable future as short-term traders start to take opposing positions now that at least some signs of a potential bottom in the price of oil have started to appear.
One concern people have had about falling energy prices is that the industry's role as a driver of employment gains would be in jeopardy. Indeed, layoffs in January reached their highest levels in almost two years, according to jobs analyst Challenger. Challenger attributed about 40% of the roughly 53,000 total layoffs to the energy sector.
Yet at least for now, the jobs picture looks reasonably well. Weekly jobless claims for the week rose to 278,000, up 11,000 from last week, but that was far less than the 290,000 claims that economists had projected. With the next monthly employment report due tomorrow, expectations remain high that solid jobs growth will keep supporting U.S. economic expansion.
So far, February's gains have almost entirely made up the ground that the Dow lost in January, suggesting the possibility that the stock market will follow the same general path that it did last year. So long as views of the U.S. economy remain positive, stocks will have at least one source of fundamental support to keep them moving higher.