Stocks finished higher Thursday, but well off the highs of the session, following upbeat economic reports on GDP, jobless claims, and manufacturing.
On Thursday, the blue-chip Dow Jones industrial average, which had surged as much as 160 points, finished up 33.40 points, or 0.36%, to 9,233.45. The broader Standard & Poor's 500 index added 2.82 points, or 0.29%, to 990.31. The tech-heavy Nasdaq composite index was up 14.23 points, or 0.83%, to 1,735.14.
"The economic data continued to improve from the sluggish pace of the first half of the year with better signs of health in the two key areas of weakness: manufacturing and employment," says Jeff Kleintop, PNC Advisor's chief investment strategist, referring to Thursday's strong economic reports.
Friday brings more economic news to mull. An update on employment Friday will be watched closely as Tuesday's confidence report showed weakness in the jobs components. July non-farm payrolls are expected to rise 30,000. Still, this report probably holds the most upside of any report since January, as July seasonal factors suggest upside risk. "We would focus on areas of the report that tend to lead an overall pick-up in net hiring -- hours worked and temp employment," says MMS.
"[G]iven that economic activity has only recently begun to show some sign of acceleration, there is no reason to expect much in the way of an underlying improvement in hiring until stronger growth looks more sustainable," says MMS senior economist Rick MacDonald. MMS is projecting a fall in the unemployment rate to 6.3%, from 6.4%.
The University of Michigan's Consumer Sentiment index in July should be unchanged from the preliminary reading of 90.3, says economic research group MMS International. Until underlying trends in the labor market begin to improve, the upside to sentiment will likely remained contained, MMS says.
A broad gauge of manufacturing, the Institute of Supply Management index, is expected to jump in July to 53.0 from June's level of 49.8. Factory sentiment and activity are finally beginning to rise following the disappointing growth in the first-half of the year, says MMS.
In corporate news, results for Dow industrials member Disney (DIS), released after the market close Thursday, were better than expected. Revenues for the fiscal third quarter rose $6.2 billion from $5.8 billion while net income increased to $400 million from $364 million a year ago. Earnings per share were 19 cents, up from 18 cents. Analysts expected 16 cents per share.
No major companies are expected to report earnings Friday.
On Thursday, two Dow industrial companies reported results: ExxonMobil (XOM) and Procter & Gamble (PG).
Consumer products giant P&G said Thursday morning that quarterly profit rose 5% on the strength of new products like tooth whiteners and the effect of a weak dollar. Net income for the fiscal fourth quarter ended June 30 rose to $955 million, or 68 cents a share, up from $910 million, or 64 cents a share.
Oil giant Exxon Mobil reported second-quarter profit amid higher oil and gas prices and better margins for its refining business. Net income advanced to $4.17 billion, or 62 cents a share, from $2.64 billion, or 39 cents, in the year-ago quarter.
Some better-than-expected economic data released Thursday led Treasuries to a sharp price decline.
U.S. gross domestic product rose 2.4% in the second quarter, beating MMS' expectation of 2.0%. Personal consumption expenditures were up 3.3%, which was partially offset by a $17.9 billion decline in inventories. MMS raised its GDP forecasts to 4.5% for the last two quarters of 2003 and the first quarter of 2004.
Initial jobless claims fell 3,000 in the week ended July 26 to the 388,000 level. This is in contrast to expectations of a solid rebound in the figure following the plunge seen in the previous week, says MMS. Auto retooling distortions cast some doubt about the number, however. In other details, the four week moving average fell 12,000 to 409,000.
In other economic news, the second-quarter employment cost index rose 0.9% compared to an unrevised 1.3% rise in the first quarter -- a shade below consensus forecasts of a 1.0% result. Wages and salaries rose a tame 0.6% compared with 1.0%, while benefit costs gained 1.4% compared to a 2.2% rise.
U.S. Chicago PMI, a gauge of manufacturing conditions in the Midwest, jumped to 55.9 in July from 52.5 in June, better than economists' expectations. The strength was paced by new orders which surged to 61.7 from 54.8. Production rose to 58.4 from 56.5. Employment improved to 46.0 from 43.8. Prices paid slipped to 47.7 from 49.1.
European stocks finished higher Thursday following stronger-than-expected GDP data in the U.S. In London, the Financial Times-Stock Exchange 100 finished up 15.8 points, or 0.38%, to 4,157.0.
In Germany, the DAX Index advanced 58.83 points, or 1.72%, to 3,487.86, amid reports Euroland business confidence is improving and the Ifo Institute sees the German economy growing 1.7% next year. In France, the CAC 40 finished up 37.76 points, or 1.19%, to 3,210.27.
In Asia, major stock indexes ended mixed. Japan's Nikkei index finished down 69.45 points, or 0.72%, to 9,563.21, following a 201.65 point drop Wednesday. The index was hurt by losses in some high-tech firms. Meanwhile, Hong Kong's Hang Seng index added 13.61 points, or 0.13%, to 10,134.83.