Positive volatility: Stocks rally as Dow closes up 178 points

Not all stock market volatility is bad volatility, and The Dow's proved it Thursday with a 180-point jump.

U.S. stocks, which have entered a difficult and more volatile stretch in recent sessions, were sharply higher despite lower-than-expected retail sales last month and continued concerns about whether central bank policy will become less market-friendly.

The Dow Jones industrial average, which has finished lower five of the past six sessions, rose 178 points, or 1%, to 18,213. The broad Standard & Poor's 500 stock index gained 21 points, or 1%, to 2147 and the Nasdaq composite jumped 76, or 1.5%, to 5250.

The Dow is being helped by another rally in shares of iPhone maker Apple (AAPL), which are up  3.4% today to $115.57, extending its gain this week to more than 12% on optimism surrounding the release of the latest version of its signature iPhone.

The yield on the 10-year Treasury note moved higher to 1.712%, up from 1.699% Wednesday and hit its highest level since June 23, the day Britain voted to exit the European Union and shocked global markets.

With interest rate uncertainty weighing on markets ahead of the Federal Reserve's highly anticipated policy decision next Wednesday, Wall Street turned its attention to a batch of fresh economic data released Thursday.

The data was mixed:

•Retail sales. In a sign that consumers are spending less, August retail sales fell 0.3%, more than the drop 0.1% analysts had forecast and the first time monthly sales have been negative since March.

•Inflation. On the inflation front, prices at the wholesale level also came in softer-than-expected, with the so-called producer price index coming in flat in August, shy of the 0.1% gain forecast.

•Unemployment. Employment data, however, continued to come in solid. The number of Americans filing for first-time unemployment benefits inched up 1,000 to 260,000 in the lastest weekly reading, a tad better than the 265,000 expected.

•Retail. The soft retail data seemed to further reduce the odds of the Fed increasing rates next week, which likely gave the stock market a lift. According to the CME Group, futures markets are now pricing in just a 12% chance of the Fed hiking rates next Wednesday, down from 15% Wednesday.

“The data that came in today, weak retail sales and industrial production, largely throws a cold bucket of water over expectations for a Sept. hike,” says Bill Northey, chief investment officer at the Private Client Group at US Bank. “It becomes a very remote possibility."

In other central bank news, the Bank of England kept its key interest rate at a record low 0.25%, nor did it boost its current bond-buying program. Still, the bank also hinted that "another rate cut could be on the horizon," Christopher Vecchio, a currency analyst at DailyFX, said in a reort distributed via e-mail. The bank noted that the United Kingdom's economy is holding up better than expected since the Brexit vote, but Vecchio says "the BOE noted that it's too early to declare victory over a potential economic decline."

Central banks remain very much in the picture, as global investors begin to question the effectiveness of the unprecedented stimulus to boost growth. Next Wednesday all eyes will be on the Fed meeting, as well as a Bank of Japan meeting.

Stocks were mixed in Europe and Asia. The broad Stoxx Europe 600 was up 0.6% and shares were higher in Germany and France. In Asia, Japan's Nikkei 225 fell 1.3% to a three-week low. Hong Kong's Hang Seng index rose 0.6%.


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