US markets surge on good economic reports and ECB President comments

The US markets surged on Thursday, after durable goods orders increased in June and weekly jobless claims fell more than anticipated, lifting the Dow Jones Industrial Average to its best day of the month and into positive terrain for the week. The sentiments also got a lift after the European Central Bank signaled its intention to preserve the euro. In US, the number of people who filed applications for unemployment benefits fell sharply last week, marking the third straight week of big swings related to changing employment patterns in the auto industry. The Labor Department stated that jobless claims sank by 35,000 to a seasonally adjusted 353,000 in the week ended July 21, putting them just above a four-year low. It was also the biggest one-week decline of the year. Besides, another report said orders for durable goods rose for a second month, up 1.6% in June. Stronger orders for airplanes and defense equipment translated into a better-than-expected 1.6% increase in durable-goods orders in June. It was the second straight monthly increase for durable-goods orders and the increase was stronger than expected.

In Europe, the ECB leader suggested that policy makers could step into bond markets as rising yields in Spain and Italy threatened to unravel the 17-nation euro zone. European Central Bank President Mario Draghi indicated that the institution is ready to resume purchases of Spanish and Italian government bonds in a bid to bring down borrowing costs and ensure the survival of the euro. He also reiterated that ECB purchases of Spanish and Italian bonds are back on the table for discussion. Besides, Italy sold €2.5 billion in zero-coupon bonds due in May 2014 at an average yield of 4.86% compared to 4.71% at a similar sale a month ago. Separately, Moody's Investors Service lowered its rating outlook on 17 German banking groups to 'negative' following outlook change on German sovereign and sub-sovereigns. Also, Egan-Jones, the credit rating agency downgraded Italy's sovereign debt rating to ‘CCC+’.

The Dow Jones industrial average gained 211.88 points, or 1.67 percent, to 12,887.90. The S&P 500 Index gained 22.13 points, or 1.65 percent, to 1,360.02, while the Nasdaq Composite was up by 39.01 points, or 1.37 percent, to 2,893.25.

The Indian ADRs closed mostly in green on Thursday, ICICI Bank was up 1.02%, Dr. Reddy’s Lab was up 0.49%, Infosys was up 0.48% and HDFC Bank was up 0.40%. On the flip side, Wipro was down 0.02% and Sterlite Industries down by 0.01%.