Stocks rallied in the last hour of trading Thursday to finish higher amid mixed economic signals -- including a disappointing manufacturing report and a better-than-expected jobless claims update. Meanwhile, encouraging comments from chip giant Intel Corp. (INTC) boosted the company's shares and helped the stock market overall.
"Toward the close we saw some cautiousness ahead of tomorrow's employment data," says Peter Cardillo, chief strategist with Westfalia Investments. Investors on Friday will look to the key jobs data report for July for clues on whether the stumbling economy is bottoming. "Unless we get hit with some real negative economic news I think the market is ready to move higher."
On Thursday, Dow component Intel, which benefited from Merrill Lynch's upgrade of 11 key chip stocks Wednesday, kept the blue-chip index in positive territory. Intel's president, Craig Barrett, added to the Merrill Lynch analysts' comments, saying the computer industry has bottomed, but a full recovery depends on a rebound worldwide.
"I would say that with the cash on the sidelines there is underlying demand in the market, and Wall Street firms are empowering people and encouraging them to get back into the semiconductors and semi-equipment groups," Sam Israel, managing partner of Bayou Group and co-manager of Bayou Fund, a hedge fund based in Stamford, Conn., told Standard & Poor's market research unit.
Stronger-than-expected jobless claims data helped investor confidence. New unemployment claims for the week ended July 28 surprised economists as the number fell 23,000, to 346,000. Analysts at S&P had expected a rise in claims by 34,000. Though employment data tend to be more volatile during summer, the figure suggests that the labor market may be stabilizing.
Among stocks in the news, chipmaker PMC-Sierra (PMCS) surged following word that the company's shares will replace Quaker Oats (OAT) in the S&P 500 index. Quaker Oats is being acquired by PepsiCo (PEP).
The Dow Jones Industrial Average added 41.17 points, or 0.39%, to 10,551.18. The tech-heavy Nasdaq gained 19.00 points, or 0.92%, to 2,087.38. The broader S&P 500 Index gained 4.82 points, or 0.40%, to 1,220.75.
U.S. Treasuries were off sharply as stronger than expected jobless claims data prompted selling ahead of Friday's employment report. Overall strength in global stocks also contributed to a lack of buying interest in Treasuries. Meanwhile, two-year and five-year Treasury notes came under additional pressure from a recovery in Argentinean markets, as a wave of "flight-to-safety" buying spurred by a plunge in that country's key stock index yesterday was reversed.
European markets ended mixed Thursday after a surprise rate cut from the Bank of England. The easing of 25 basis points brings the key official interest rate to 5%. In London, the Financial Times 100 Index closed higher by 37.60 points, or 0.68%, to 5,584.50. European stocks rallied after the Bank of England rate cut, even though the European Central Bank did not follow with its own rate cut, but gains turned to losses in late trading in Germany and France. France's CAC 40 Index ended off 23.78 points, or 0.47%, to 5,088.70. Germany's DAX Index lost 57.95 points, or 0.99%, to 5,777.28.
Asian markets ended Thursday's session mixed. Japan's Nikkei 225 Index soared 439.87 points, or 3.68%, to close at 12,399.20. The Nikkei rally was helped by buying interest from pension funds, which had unloaded holdings recently because of the declining market. Chipmakers and related shares led the gains. However, Hong Kong's Hang Seng lost 12.37, or 0.10% points, to close at 12,466.37. By Amy Tsao in New York