Business Week: Stocks continue rally after drop in jobless claims
By: Stephen Bernard
Stocks extended their September rally Thursday after more encouraging news on the job market.
The Dow Jones industrial average rose 17 points in afternoon trading, putting it back into positive territory for the year, after the Labor Department said first-time claims for unemployment benefits fell last week to the lowest level in two months.
The report came in much better than analysts had expected and added to other positive signals on the economy, including a pickup in job creation for August reported last week. Treasury prices and the dollar fell as investors stepped up their appetite for risk.
“The employment report is still the king of kings,” said Edwin Denson, head of market strategy at Singer Partners LLC. “The labor market is still the indicator, that if it’s positive, would give people the most comfort.”
Unemployment claims have still not fallen enough to suggest that widespread hiring is around the corner, but investors have taken solace in recent employment news that suggest the economy will continue to grow slowly during the rest of the year. Traders concerned about the potential for the economy to slide back into recession drove stocks lower through most of August.
“All we need is slightly good news … relative to expectations and at this point expectations are relatively poor,” said Tyler Vernon, principal and portfolio manager at Biltmore Capital Advisors.
The Dow rose 16.87, or 0.2 percent, to 10,404.26 in afternoon trading.
The Standard & Poor’s 500 index rose 4.48, or 0.4 percent, to 1,103.35, while the Nasdaq composite index rose 8.21, or 0.4 percent, to 2,237.08.
Stocks have rallied since the beginning of September on the improving outlook for the economy, and are on track to have their sixth day of gains out of the last seven.
First-time claims for unemployment benefits fell to 451,000 last week, much better than the 470,000 expected by analysts polled by Thomson Reuters. But that’s still well above the 400,000 level that economists say is a signal of strong economic growth and job creation.
Bond prices fell, sending the yield on the 10-year Treasury note up to 2.71 percent from 2.66 percent late Wednesday. That yield helps set interest rates on mortgages and other consumer loans.
The Dow had already jumped 3.7 percent in September heading into trading Thursday. Stocks have climbed all but one day so far this month. Major indexes took a pause from the recent rally on Tuesday when worries about European government debt problems flared up early in the week.
There were concerns during the spring that mounting European debt would stunt a global recovery. Stocks fell sharply through much of the spring because of those worries.
Those worries largely dissipated after several European nations successfully auctioned new debt this week. European markets also got a bump from the U.S. jobs report. Britain’s FTSE 100 rose 1.2 percent, Germany’s DAX index gained 0.9 percent, and France’s CAC-40 rose 1.2 percent.
In corporate news, McDonald’s Corp. shares dropped as a jump in monthly sales fell short of expectations. The fast-food chain’s stock has been climbing steadily throughout the year as sales rose. McDonald’s shares fell $2.35, or 3.1 percent, to $73.73.
Apple Inc. shares rose after the company said it will publish guidelines about how determines which programs can be sold in its popular App Store. Its shares rose $2.35 to $265.27.
About two stocks rose for every one that fell on the New York Stock Exchange, where volume was extremely low at 369 million shares.