Stocks finished higher in light, tight tug-of-war trading Thursday as Wall Street cheered Bank of Japan's aggressive new stimulus measures, but a disappointing weekly jobless claims report kept a lid on gains.
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"The market is nervous for good reason; The Korean situation, confusing Fed Speak and from the technical side, the rotational correction is spreading as yesterday we had a clear break of trend line support on the NYSE cumulative advance-decline line," wrote Elliot Spar, market strategist at Stifel Nicolaus.
The Dow Jones Industrial Average gained 55.76 points to close at 14,606.11, led by Hewlett-Packard and AT&T.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, ended slightly under 14.
Among key S&P sectors, utilities and telecoms logged gains, while techs finished in the red.
"A lot of inter-market relationships are starting to breakdown," noted Keith Bliss, senior vice president at Cuttone & Co., pointing specifically to the divergence between the small caps and Dow Transportation index versus the major averages. "The broader market is starting to rollover…the S&P's intermediate bullish trendline is 1,538 – if we break below that, then we could start to see a mini correction. I think we're going to touch that trendline in the next few sessions."
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Earlier, the Bank of Japan surprised the market with an overhaul of its monetary policy, adopting a new balance sheet target and pledging to double its government bond holdings in two years. The Nikkei soared more than 2 percent to close at its best level in more than four years.
"The BoJ—along with the Fed—has now joined 'Hotel California'monetary policy: you can check out anytime you like, but you can never leave," said Bliss. "The rumors now are that the ECB is going to do the same thing."
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But other Asian markets remained cautious amid the building tensions over North Korea. Most recently, North Korea warned that its military has been cleared to wage an attack on the U.S. using "smaller, lighter and diversified nuclear" weapons.
On the economic front, weekly jobless claims popped 28,000 last week to a seasonally adjusted 385,000, hitting its highest level in four months, according to the Labor Department. It was the third straight week of gains in claims. Economists polled by Reuters had expected first-time applications last week to fall to 350,000.
Adding to the negative jobs news, outplacement firm Challenger, Gray & Christmas said layoffs surged 30 percent in the first quarter from a year ago, even though March furlough activity declined.
Both reports came ahead of the widely-followed government non-farm payrolls report, due Friday. Economists surveyed by Reuters expect to see a gain of 200,000, with the unemployment rate steady at 7.7 percent.
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In company news, Best Buy soared to lead the S&P 500 leaders after the consumer electronics retailer said it is offering a 30 percent discount on its current stock of Apple iPad 3 tablets, raising speculation that there could be a major launch of a new iPad in the near term. In addition, retailer said it would collaborate with Samsung to open kiosks in its Best Buy stores.
Facebook climbed as the social-networking giant unveiled its "Home" software that will integrate the website with Android users' smartphones, a move that may divert users from Google's services. (Read More: Mobile Move: Facebook Introduces Phone)
Meanwhile, Google dipped below its 50-day moving average. The last time the Internet giant closed below the level was October 18.
"If you are looking to buy names that have pulled back 8 to 10 percent from their highs, you have to be very selective. Many of them have broken trend line support and their 50 day moving averages," wrote Spar. "We prefer names where the technicals have held and where earnings estimates are moving higher."
In Europe, the European Central Bank (ECB) left its benchmark unchanged at 0.75 percent for the ninth month in a row.
In a press conference, ECB President Draghi said the central bank could not replace a lack of capital in the banking system and that it could not compensate for a lack of reforms by euro zone governments. He also said economic weakness was spreading to countries where fragmentation was not an issue.
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