Stocks Post Gains Ahead of Report
U.S. stocks eked out small gains Thursday after Wednesday’s powerful rally, as many traders went to the sidelines ahead of today’s May employment report.
Oil prices pulled back and long-term Treasury bond yields were stable. Gold jumped as the dollar eased.
The Dow Jones industrial average inched up 3.62 points to 10,553.49, after jumping 82.39 points Wednesday.
Stock and bond prices had surged Wednesday after Richard Fisher, head of the Federal Reserve Bank of Dallas, said the central bank was “clearly in the eighth inning” of a credit-tightening cycle.
The yield on the 10-year T-note, a benchmark for other long-term interest rates, plunged to a 13-month low of 3.89% from 3.98% on Tuesday.
Fisher’s comments raised investors’ hopes for the so-called Goldilocks scenario: an economy that is neither too hot nor too cold, in which corporate earnings could continue to advance while interest rates stayed down.
But Thursday the T-note yield edged up to 3.90% after the government said labor costs rose faster than expected in the first quarter, raising new concerns about inflationary pressures and how much higher the Fed might lift its key short-term rate, now at 3%.
“There is suddenly evidence of wage inflation where there was none before,” said Chris Low, chief economist at FTN Financial in New York.
The labor cost data boosted the stakes for bonds, and stocks, with today’s May employment report.
A large gain in new jobs could cement the idea that the Fed would continue to raise rates through the summer and perhaps into fall, analysts said.
“People will wait until the number before deciding what to do next,” said Lundy Wright, head of U.S. government bond trading at Nomura Securities International in New York.
Financial markets were somewhat soothed Thursday after crude oil slipped from a one-month high, following the Energy Department’s report that U.S. inventories of oil rose last week. Near-term oil futures fell 97 cents to $53.63 a barrel in New York.
On Wall Street, rising stocks outnumbered losers by 3 to 2 on the New York Stock Exchange.
The technology-heavy Nasdaq composite index continued to lead the way, rising 9.94 points, or 0.5%, to 2,097.80, its highest close since Jan. 18. The index has risen 10.2% since April 28.
The blue-chip Standard & Poor’s 500 index added 2.07 points, or 0.2%, to 1,204.29.
Counting reinvested dividends, the Vanguard 500 index fund, which tracks the S&P;, now is back in the black year to date, with a positive total return of 0.1%.
In currency trading the slumping euro stabilized against the dollar, ending at $1.227, up from $1.221 on Wednesday, after the European Central Bank left its key interest rate unchanged at 2%.
Gold prices surged as the dollar weakened. Near-term gold futures in New York gained $7.40 to $422.70 an ounce.
Among the day’s highlights:
* Semiconductor stocks paced the tech rally. Cypress Semiconductor jumped 76 cents to $13.90, Broadcom gained $1.02 to $36.64 and Intel was up 30 cents to $27.59.
* In the Internet sector, online job recruiter Monster Worldwide surged $2.22 to $29.04. The company sold its Yellow Pages unit to Audax Group, a private equity firm, for $80 million to focus on expansion of the Monster.com business.
* Retail issues gained on some strong May sales reports. Nordstrom rose $2.67 to $64.02 and Abercrombie & Fitch soared $7.01 to $65.
* Airline issues were strong after Continental posted stronger-than-expected May traffic. Continental was up $1.10 to $14.67. AMR, parent of American Airlines, rose 99 cents to $13.72.
* Wynn Resorts jumped $3.45 to $53.40 after the owner of the newest Las Vegas hotel and casino said revenue in its first 34 days of operation was above expectations.
* Home builders’ stocks continued to rise on optimism about mortgage rates. KB Home added 56 cents to $68.26 and Toll Bros. jumped $1.60 to $96.70.
* Some industrial issues pulled back on concern that the economy might continue to weaken. Ingersoll-Rand lost $1.22 to $77.60 and Steel Dynamics fell 57 cents to $26.94. But diesel engine maker Cummins surged $2.45 to $71.58.
* Gold stocks were mixed despite the rally in bullion. Barrick Gold lost 38 cents to $22.89 and Newmont Mining fell 11 cents to $37.65, while Glamis Gold was up 19 cents to $15.
