Stocks finished with small gains Thursday -- sending to the major averages to another new high for the year -- on a busy day for economic data releases. Broad gains in technology stocks continues to be the main market theme, notes Standard & Poor's MarketScope. In particular, the Philadelphia Semiconductor Index rose 2.5%. Meanwhile, weakness in pharmaceuticals and financials held back the S&P 500.
The Dow Jones industrial average rose 19.44 points, or 0.2%, to 9,587.9. The broader Standard & Poor's 500 index edged up 1.7 points, or 0.17%, to 1,027.97. The tech-heavy Nasdaq composite index gained 16.08 points, or 0.87%, to 1,868.98.
The August employment report will be a highlight Friday. MMS International expects August nonfarm payrolls to rise 40,000, while the unemployment rate rebounds to 6.3% from 6.2%. "Given [Thursday's] rally, Treasuries are vulnerable to a downward correction on signs that the labor market is improving," says MMS.
In economic news Thursday, initial jobless claims for the week ended Aug. 30 rose 15,000 to 413,000, much weaker than expected and further evidence of a struggling labor market. The 4-week moving average rose to 401,500 from 397,200, while continued claims gained to 3.663 million from 3.639 million.
Second-quarter non-farm productivity growth was revised higher to 6.8% from 5.7%, while unit labor costs was revised to a decline of 2.8% from a decline of 2.1%.
July factory orders surged 1.6% following an upwardly revised 1.9% jump in June (up 1.7% previously). Shipments jumped 2.5% after a 1.5% rise in June, while inventories fell 0.5% after a revised 0.3% decline (down 0.2% previously). "The data are much stronger than expected and should add to the growing notion that the third quarter could be a blockbuster in terms of growth," says MMS International.
The ISM services report remained unchanged in August at July's 65.1 level, but new orders picked up to 67.6 from 66.9, prices surged to 55.7 from 50.6, and employment crept higher to 51.0 from 50.7.
Among sectors on the move, retailers were broadly lower after reporting August same-store sales. Wal-Mart Stores (WMT) posted 6.9% higher August same-store U.S. retail sales, and 14% higher net sales. The retail giant sees 3% to 5% September total same-store sales growth.
Apparel retail stocks were hit the hardest as Gap (GPS) and American Eagle Outfitters (AEOS) reported disappointing August same-store sales, which was seen as setting the tone for the fall season.
On the bright side, chip stocks rallied on positive earnings news. National Semiconductor (NSM) reported first-quarter earnings and gave an upbeat forecast for the current period. The company posted earnings per share of 15 cents, vs. 1 cent a year earlier. Revenue edged up 1% to $424.8 million from $420.6 million. Excluding extraordinary items, EPS was 18 cents, above analysts' forecast.
Cypress Semiconductor (CY) raised its third-quarter revenue outlook to $214 million vs. analysts' $209 million estimate. The company sees 12 cents per share loss per share on a GAAP basis, and 6 cents pro forma earnings per share in the third quarter. The company cited stronger than seasonal growth in consumer market.
In addition, Intel (INTC) issued a midquarter update after the close of trading. Intel said it expects third-quarter revenue to be between $7.6 billion and $7.8 billion, vs. its previous range of $7.3 billion to $7.8 billion announced on Aug. 22. Its gross margin is expected to be toward the high end of the previous range of 56%, "plus or minus a couple of points," the company said in a press release.
Also moving higher was Procter & Gamble (PG), which raised its first-quarter forecast for volume growth from existing businesses to a percentage rate in the upper-single-digits from the prior year. The consumer products maker sees 19% to 21% EPS growth, and 11% to 13% excluding the impact of an 8-cent per share restructuring charge. The company cited strong volume performance.
VaxGen (VXGN) shares soared on news the company and the Health Protection Agency (HPA) for England and Wales signed a binding letter of intent to negotiate terms that would give HPA the right to manufacture and market the company's recombinant anthrax vaccine candidate in Britain.
Treasuries finished higher in price following all of the data releases. Higher than expected jobless claims data helped the bullish cause as did positive (dovish) Fedspeak, says MMS International. By the close, the entire curve finished in the green with a strong curve steepening influence.
A blistering revised second-quarter productivity surge of 6.8% and jump in jobless claims back above 400,000 molded images of a jobless recovery, while robust 1.6% factory orders gain in July and firm ISM Services index at 65.1 shaped expectations of the recovery gathering steam, says MMS International. Then Fedspeak tipped the scales back away from Fed tightening expectations, with Bernanke, Parry and McTeer all ganging up to argue in favor of giving growth a chance, says MMS.
European stock markets were mixed. London's Financial Times-Stock Exchange 100 index closed with a loss of 13.3 points, or 0.31%, to 4,248.8 on profit taking. The Bank of England left key rates at a 48-year low as the U.K. economy has shown signs of growth.
In Paris, the CAC 40 fell 12.09 points, or 0.35%, to 3,410.69 on profit taking. Germany's DAX index edged up 21.16 points, or 0.58%, to 3,668.67. German factory orders fell in July, while unemployment was unchanged, boosting recovery hopes. The European Central Bank left rates unchanged at its policy meeting.
Asian markets finished mixed. In Japan, the Nikkei 225 index lost 68.74 points, or 0.64%, to close at 10,646.95, as the market lost momentum in the afternoon, as profit taking on large caps and high techs mounted. In Hong Kong, the Hang Seng index gained 36.26 points, or 0.33%, to close at 11,138.62.