U.S. Stocks Rise As Jobless Claims Drop To Four-Year Low

October 11, 2012 | By
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The US economy continues to rebound as US stocks rise and jobless claims drop.


U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for the first time in five days, as American jobless claims slid to a four-year low and Italy’s bond yields fell after a debt sale

Bank of America Corp. (BAC) and JPMorgan Chase (JPM) & Co. advanced at least 1.6 percent after a report the European Union may push back the deadline for applying tougher Basel bank-capital rules for as long as a year. Nine of 10 groups in the S&P 500 gained as commodity and financial stocks posted the biggest rallies. Sprint Nextel Corp. jumped 13 percent as Japan’s Softbank Corp. was said to be in talks to buy control of the company.

The S&P 500 added 0.6 percent to 1,441.53 at 10:21 a.m. in New York. The benchmark gauge fell to the lowest level in a month yesterday on concern that the global economy is slowing down and will hurt corporate earnings. The Dow Jones Industrial Average rose 57.45 points, or 0.4 percent, to 13,402.42 today. Trading in S&P 500 companies was 43 percent above the 30-day average at this time of day.

The claims report “is consistent with the improving jobs numbers and consumer confidence we’ve been seeing,” Brian Gendreau, a market strategist at El Segundo, California-based Cetera Financial Group Inc., said in a telephone interview. The firm has about $20 billion in assets under management. “It just adds to the picture of a U.S. economy that’s recovering. Not as fast as anyone would like, but still improving.”

Stocks extended gains after Labor Department figures showed fewer Americans than forecast filed first-time claims for unemployment benefits last week, which may reflect difficulty adjusting the data for seasonal swings at the start of a new quarter.

Jobless Benefits

Applications for jobless benefits dropped 30,000 to 339,000 in the week ended Oct. 6, the fewest since February 2008. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. One state accounted for most of the plunge in claims, a Labor Department spokesman said. The year’s increase was smaller than projected, because one large state showed a drop rather than an increase, said the spokesman, who declined to name the state. The breakdown by state will show up in next week’s report.

“The economy is improving, we’re doing a better job,” Philip Orlando, the New York-based chief equity strategist at Federated Investors Inc., which oversees about $370 billion, said by phone. “I think we should be going faster but this is a phenomenal claims number. So now the question is, ‘Is this number real or is it going to get revised away next week?’” He said, “Give me some meat so I understand why it’s a good number and whether it’s sustainable.”

Trade Deficit

A report showed the U.S. trade deficit widened in August as slower global growth reduced demand for American exports. The gap grew 4.1 percent to $44.2 billion from $42.5 billion in July, Commerce Department figures showed today in Washington. Exports decreased to the lowest level since February. Separate data showed the cost of goods shipped to the U.S. rose more than forecast in September.

The Federal Reserve said yesterday that the U.S. economy expanded “modestly” last month, supported by improvements in housing and auto sales, even as the labor market showed little change.

Stocks were also bolstered today as strategists at Citigroup Inc. upgraded U.S. equities to overweight, citing “aggressive” central-bank stimulus plans and strong momentum in companies’ earnings per share. They also predicted a 9 percent rally in the MSCI AC World Index by the end of next year.

Read the whole story:  BloombergBusinessweek


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