If you're watching market sentiment indicators, Thursday brought some good news. The CNN Money Fear and Greed Index climbed to 46.0 from 43.7, officially entering "Neutral" territory after hanging out in the "Fear" zone. And the market action backed it up—U.S. stocks closed mixed, with the Dow Jones jumping more than 250 points.
Defense stocks were the stars of the show, completely erasing Wednesday's losses after President Donald Trump floated the idea of a sharp increase in U.S. military spending. Wall Street perked up immediately. Small-cap defense contractors led the charge: Kratos Defense & Security Solutions, Inc. (KTOS) soared 14%, while Red Cat Holdings, Inc. (RCAT) gained 13%. Karman Holdings Inc. (KRMN) rose 10%.
On the economic data front, things looked reasonably steady. U.S. initial jobless claims increased by 8,000 from the previous week to 208,000 in the week ending Jan. 3, compared to market expectations of 210,000. More interesting was the trade deficit, which shrank to $29.4 billion in October—the smallest gap since June 2009. That's a dramatic improvement from September's revised $48.1 billion gap and well below market estimates of a $58.1 billion shortfall.
Most sectors on the S&P 500 closed higher, with energy, consumer staples, and consumer discretionary stocks recording the biggest gains on Thursday. Health care and information technology stocks bucked the trend, closing lower and dragging down the broader tech-heavy Nasdaq.
By the closing bell, the Dow Jones had climbed around 270 points to 49,266.11. The S&P 500 rose a modest 0.01% to 6,921.46, while the Nasdaq Composite declined 0.44% to 23,480.02.
