Stocks Rise Following Drop in Jobless Claims

As 2009 draws to a close the figures released during November show a sign of things to come in the new year. The country’s economic center saw stocks rise as recent reports released reveal positives signs in jobless claims in both State and the US. This is what BusinessWeek had to say on the news:

Better than expected reports on new home sales and personal income, along with a fall in jobless claims, boosted equities

Major U.S. stock indexes closed higher in slow pre-Thanksgiving trading Wednesday, rising in step with gains in commodities as favorable reports on home sales, jobless claims, and consumer sentiment fanned optimism that the economic recovery is continuing.

“We had a remarkably heavy calendar of U.S. economic reports [Wednesday] in advance of the Thanksgiving Day holiday, and the array of modest surprises were arguably skewed toward a somewhat improved outlook,” said Action Economics chief economist Michael Englund in a note Wednesday.

U.S. markets will close Thursday for the Thanksgiving Day holiday.

On the New York Stock Exchange, 20 stocks were higher in price for every 10 that declined. Breadth on the Nasdaq was 14-12 negative.

The dollar was skidding Wednesday after the FOMC said Tuesday that its decision to cut interest rates to zero may be fueling undue financial-market speculation even as it called the dollar’s slide “orderly.” The U.S. dollar index was sharply lower at 74.50.

The steep drop in the dollar index supports the case for further upside in equities, says S&P technical analyst Chris Burba. “Dollar weakness is conducive to carry trades, which involve buying U.S. stocks and other securities with dollars that were borrowed at a low interest rate. As long as asset prices keep rising, interest rates stay down and the dollar value is stable or weakening, the trade stays profitable.”

In economic news Wednesday, U.S. new home sales rose 6.2% to a 430,000-unit annual pace in October, following a revised 405,000 pace in September [from 402,000]. Strength was seen only in the South where sales climbed 23.2%; declines were seen in the West [-5.1%], the Northeast [-5.1%], and the Midwest [-20.0%]. The months’ supply of unsold homes dropped to 6.7 months [the lowest since December 2006] from 7.4 [revised from 7.5]. The median sales price rose to $212,200, from an upwardly revised $210,700 [was $204,800].

U.S. consumer sentiment improved to 67.4 in the final November reading from the University of Michigan survey, following the drop to 66.0 in the preliminary report. The index was 70.6 in October and hit a high for the year t 73.5 in September. The current conditions component remained soft, falling to 68.8 versus the 69.6 preliminary [73.7 October]. The future index jumped to 66.5 from the preliminary 63.7 [68.6 October].

U.S. durable goods orders fell 0.6% in October following an upwardly revised 2.0% in Sepember [was 1.4%]. Transportation orders clmibed 1.5%, while orders excluding transportation declined 1.3%. Non-defense capital goods orders excluding aircraft declined 2.9%, erasing September’s 2.6% gain. Shipments dipped 0.2% following a 1.6% increase in September. Inventories were flat. The inventory-sales ratio was steady at 1.75 [September’s 1.77 was revised down].

U.S. initial jobless claims were down 35,000 to 466,000 in the week ended November 21 from a revised 501,000 [was 505,000] the week before. That is the lowest level since the September, 2008 week. Continuing claims declined a large 190,000 to 5,423,000 in the week ended November 14, from a revised 5,613,000 [was 5,611,000] the week before.

“The data are much better than expectations, and should weigh on Treasury yields, and the dollar, and support Wall Street,” says Action Economics.

U.S. personal income rose 0.2% in October, and spending increased 0.7%. September’s flat income reading was revised up to 0.2%; the 0.5% dip in spending in September was revised lower to -0.6%. Wages and salaries were flat last month and disposable income rose 0.4%. The savings rate slowed to a 4.4% clip from 4.6%. The PCE price index rose 0.3% on the month, and is up 0.2% year-over-year following five months of declines. The core PCE deflator edged up 0.2% in October and accelerated to a 1.4% year-over-year rate vs. 1.3% previously.

Sources: Article by BusinessNews of msnbc (http://www.msnbc.msn.com/id/34163608/ns/business-businessweekcom/)

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