U.S. Stocks rally, Jobless claims down
U.S. STOCKS RALLY ON SOLID EARNINGS, DROP IN JOBLESS CLAIMS. Wired from USA Today
NEW YORK – More signs of an improving U.S. economy lifted stocks for a second straight day. The U.S. market got a lift after the Labor Department said initial claims for unemployment benefits fell last week. First-time claims dipped to 448,000, slightly above analysts’ forecast of 445,000. Stocks had help from rising hopes that the Greek debt crisis will be resolved in time to prevent panic across the continent. The Dow Jones industrials rose 122.05 points, or 1.1%, to 11,167.32. In the broader market, the Standard & Poor’s 500 index climbed 15.41, or 1.3%, to 1,206.77 and the Nasdaq composite index rose 40.19, or 1.63%, to 2,511.92. About three shares rose for every one that fell on the New York Stock Exchange, where volume came to 1.04 billion shares.
The Russell 2000 index of smaller companies rose 11.25, or 1.6%, to 733.64. Earnings were the primary driver of stocks on Thursday, even as long-term concern remains about Europe. Starwood Hotels & Resorts Worldwide Inc.’s profit jumped sharply as more people checked in its hotels, including the Sheraton, W, and Westin. Drug maker Bristol-Myers Squibb Co., phone maker Motorola Inc. and Time Warner Cable Inc. also reported stronger earnings. Dealmaking and strong corporate earnings reports provided fresh evidence that the U.S. economy is healing. Hewlett-Packard said late Wednesday it is buying smart phone maker Palm Inc. in an all-cash deal worth $1.4 billion. Acquisitions are a sign that the economy is recovering and companies are comfortable spending cash to build their businesses.
“Business are in a very strong position financially,” said Doug Lockwood, chief investment officer at Cornerstone Wealth Management in Auburn, Ind. Companies have built up big cash reserves that cannot only go toward deals, but also eventually to hire back workers, Lockwood said. Companies including Motorola, Time Warner Cable and Starwood Hotels & Resorts reported earnings that topped analysts’ expectations, as have many other companies that announced first-quarter results in recent weeks. “It just seems like the market is moving and moving and nothing is going to get in its way,” said Steve Stahler, president of the Stahler Group Inc. in Baton Rouge.
Over the past two days, the Dow has recovered most of its 213-point loss it posted on Tuesday in response to growing concerns about European countries’ debt problems. Some analysts said Tuesday that investors were overreacting to the situation in Europe. But they also acknowledged the market was due for a pullback after moving steadily higher for months. When stocks go in one direction for a sustained period of time, market watchers worry that investors are buying or selling indiscriminately. European stock markets rose Thursday after two days of steep declines. On Wednesday Spain became the third European country this week to see its debt rating slashed by Standard & Poor’s, following Greece and Portugal.
Overseas, Britain’s FTSE 100 rose 0.6%, Germany’s DAX index gained 1%, and France’s CAC-40 rose 1.4%. Japan’s market was closed for a holiday. There are concerns that debt problems will spread across the continent and slow a global economic recovery. The most pressing problems are in Greece, which is still trying to tap a bailout package worth nearly $60 billion. European Union officials said again Thursday that Greece would have access to the money that will help it avoid defaulting on debt payments next month. The downgrades of Greek and Portuguese debt on Tuesday sent indexes worldwide tumbling. Guy LeBas, chief fixed income strategist of Janney Montgomery Scott in Philadelphia, said the Greece crisis is “the tip of the iceberg for the European Union.”
The debt crisis has the potential to drag down a European economic recovery and lead to a collapse of the euro, a currency shared by 16 member nations, LeBas said. On Wednesday, fears of what analysts are calling “contagion” mounted after Standard & Poor’s cut Spain’s credit rating one level to AA and maintained its negative outlook. The move came just one day after the rating agency dropped Greece three levels to junk status and pulled also-troubled Portugal down two notches. “Contagion is already happening,” said Ousmene Mandeng, an economist at Ashmore Investment Management in London.