Market Watch: US Stocks Edge Higher On Strong Factory Data
By Brendan Conway
NEW YORK (MarketWatch) — U.S. stocks inched into positive territory, as a white-hot reading from mid-Atlantic manufacturers outweighed higher-than-expected jobless claims and a rise in U.S. consumer prices.
A day after investors pushed the Standard & Poor’s 500-stock index to twice its financial-crisis low, the Dow Jones Industrial Average rose 13 points, or 0.1%, to 12301 in afternoon trade, while the Standard & Poor’s 500-stock index rose 3 points, or 0.2%, to 1339 and the Nasdaq Composite gained 6 points to 2832. Energy and materials stocks led the S&P 500, while Coca-Cola and Intel led the Dow’s gainers.
Investors were keeping a close eye on tensions in Libya, Bahrain and fears of a standoff between Iran and Israel over the Suez Canal. But so far, those haven’t dominated the day’s trading.
“I don’t see long term these geopolitical issues affecting the corporate earnings story here in the U.S. market, so I’d be using it as a buying opportunity,” Tyler Vernon, chief investment officer of Princeton, N.J.-based Biltmore Capital Advisors said.
The Federal Reserve Bank of Philadelphia’s index of general business activity hit its highest level since January 2004, handily outstripping expectations as it jumped to 35.9 from 19.3 the month before. Even though factories represent a relatively small amount of total U.S. economic performance, they tend to serve as a leading indicator, and the strong reading was seen as a positive signal of the economy’s momentum.
Even so, the U.S. labor market remained sluggish, keeping the optimism in check. Initial jobless claims increased by 25,000 to 410,000 in the week ended Feb. 12, the Labor Department said in its weekly report. Economists surveyed by Dow Jones Newswires had expected claims would rise last week by 17,000 to 400,000. The previous week’s total was revised to 385,000 from 383,000.
Separately, the seasonally adjusted consumer price index last month increased by 0.4% from December, and underlying inflation, which excludes volatile energy and food prices, rose by 0.2%.
Neither the worse-than-expected reading on jobs nor the somewhat higher inflation figures were likely to change investors’ overall positive outlook, said Timothy Harder, chief investment officer at Peak Capital Investment Services. “They both signal that the economy is getting healthier in the bigger picture.”
The euro rose to $1.3593 from $1.3570 late Wednesday. Crude-oil prices neared $86 a barrel, and gold also rose.
Strategists warned that sentiment on simmering Middle East and North African tensions could change quickly.
“If it was just Iran sending ships, that’s one thing, but you’ve also got Libya and Bahrain in the news, plus Egypt,” Jay Suskind, senior vice president at Duncan Williams, said. “I do still think the average investor is more focused on the domestic economy. A geopolitical storm could have investors saying, “‘Let’s take some profits,'” he added.
Among stocks in focus, NetApp weighed on the technology sector, skidding 6.5% after a disappointing earnings report.
Chip maker Nvidia rose 6.8% after the company posted a 31% increase in fourth-quarter earnings and better-than-expected first-quarter guidance late Wednesday.
Skechers USA’s stock rose 1.9% after the shoe company’s fourth-quarter earnings showed better-than-expected top-line growth.
Natural-gas group Williams Cos.’ stock jumped 7.7% after the group’s board approved a plan to spin off its exploration and production business.
Cliffs Natural rose 6.8% after the coal and iron-ore producer reported fourth-quarter profit that more than tripled, with higher sales volume and prices.
Weight Watchers surged 42% and hit an all-time high as the company’s fourth-quarter profit more than doubled. While the activity took most investors in the stock market by surprise, analysts in the options market were abuzz over big, remarkably well-timed trades earlier in the week that set up some investors for huge profits.
“They made a ton of money on these, in a matter of days,” Interactive Brokers equity options analyst Caitlin Duffy said. Big trades Monday in Weight Watchers’ normally thinly traded February $45 call options jumped in price from about 85 cents Monday to near $19 Thursday, a huge windfall for any trader who held the option.