Stocks trade moderately higher on jobs data
Traders are betting that an improving economy will reward banks and energy companies.
Stocks rose for the fifth time in six days Thursday after analysts raised their ratings on banks and oil prices rose again, making energy firms look increasingly attractive. Investors were also willing to take more chances on stocks after the government reported that the number of workers continuing to receive unemployment benefits unexpectedly fell for the first time in 20 weeks.
The drop in unemployment rolls, as well as in first-time claims for jobless benefits, gave investors another bit of hope that the economy was finding a more stable footing. The idea that the economy was halting its slide has driven a powerful rally that has lifted the Standard & Poor’s 500 index 39.8% in three months.
The data arrived a day before the government’s monthly tally of job losses, which is often seen as the most important report on the economic calendar. The unemployment rate stood at a 25-year high of 8.9% in April, and economists expect it to rise to 9.2% when the May report is issued today.
Investors are looking for any sign that unemployment is ebbing because that could help shore up consumer spending, retail sales and the housing market.
“Things seem to have stabilized, and people are hunting for any sort of information they can get to determine the next move in the market and the economy,” said Jim Sinegal, equity analyst at Morningstar in Chicago.
The Dow Jones industrial average rose 74.96, or 0.9%, to 8,750.24. The broader Standard & Poor’s 500 index rose 10.70, or 1.2%, to 942.46, and the Nasdaq composite rose 24.10, or 1.3%, to 1,850.02. The S&P; and Nasdaq are at new highs for the year, and both are showing gains for 2009. The Dow is down only 26 points for the year, having been in the red since early January.
Bond prices fell after the drop in jobless claims. Fewer worries about the economy made the safety of government debt less attractive. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71% from 3.54%. The yield has been fluctuating recently as investors absorbed a mix of economic data. The gains in financial and energy stocks offset mixed reports from retailers on their May sales.
Banks got a boost after RBC Capital Markets analysts said the worst of the financial crisis was over. The KBW Bank index, which tracks 24 of the largest U.S. banks, rose 4.8%.
KeyCorp jumped 90 cents, or 19.6%, to $5.50 after an upgrade from RBC, while Goldman Sachs Group rose $7.32, or 5.2%, to $149.47 after a Bernstein Research analyst raised his rating.
The improved data on unemployment and a weak dollar helped push oil prices to fresh highs for the year. Commodities have been rallying on expectations that an improving economy will lift demand.
Light, sweet crude rose $2.69 to settle at $68.81 a barrel on the New York Mercantile Exchange. That helped energy companies: Anadarko Petroleum rose $1.52, or 3.2%, to $48.57, while Occidental Petroleum advanced $1.75, or 2.6%, to $68.62.
Retailers including Macy’s and Abercrombie & Fitch lost ground as traders worried that shoppers were still reluctant to spend. A year ago, sales benefited from government stimulus checks. Macy’s fell 44 cents, or 3.3%, to $12.88. Abercrombie slid $3.75, or 11.8%, to $27.95.
In other trading, the Russell 2000 index of smaller companies rose 8.97, or 1.7%, to 531.68.
Overseas, Japan’s Nikkei stock average fell 0.8%. Germany’s DAX index rose 0.2% while Britain’s FTSE 100 and France’s CAC-40 each gained less than 0.1%.
