Major U.S. stock indexes finished higher Thursday, though below earlier highs, following a dramatic reversal lower for oil prices, which plunged despite a huge decrease in U.S. crude inventories.
A report on U.S. economic growth in the first quarter was revised slightly higher. S&P MarketScope cites a growing perception that the U.S. escaped recession as second-quarter GDP is expected to rise as well. Weekly initial jobless claims were slightly higher.
Bonds fell but closed up from session lows following an apparent asset allocation program to equities from debt. The dollar index was solidly higher. Gold futures were lower.
On Thursday, the blue-chip Dow Jones industrial average finished higher by 52.19 points, or 0.41%, to 12,646.22. The broader S&P 500 index added 7.42 points, or 0.53%, to close at 1,398.26. The tech-heavy Nasdaq composite index was higher by 21.62 points, or 0.87%, ending the session at 2,519.90.
Activity in the broader market was positive, with 19 stocks rising in price for every 11 that declined on the New York Stock Exchange. The ratio on the Nasdaq was17-11 positive. Trading was sluggish, reports S&P MarketScope. Financial stocks were strong.
July West Texas Intermediate crude oil futures, which hit a high of $133.12 per barrel earlier in Thursdays session, fell $4.17 to $126.77 after an Energy Dept. report showed crude stocks unexpectedly fell 8.8 million barrels. Citi Futures' Tim Evans said the drop came "on a combination of lower imports and higher crude runs and was focused on the Gulf Coast, which showed a 9.3 million barrels drop. Inventories at Cushing, Oklahoma rose 700,000 barrels."
S&P's Mark Arbeter believes "crude oil prices are in the topping phase, and we think we could see a fairly large correction back to the $100 to $110/barrel range over the next two to four months.
U.S. jobless claims rose 4,000 to 372,000 for the week ended May 24, about in line with the 370,000 expected, according to S&P Economics. The 4-week moving average edged down to 370,500 from 373,000. Continuing claims jumped 36,000 at 3,104,000 in the week ended May 17.
The data remain below levels usually seen during a recession, to contradict claims that the unemployment rate will climb higher this year, wrote S&P economist Beth Ann Bovino in a note Thursday.
First-quarter real gross domestic product growth was revised to 0.9% from the 0.6% reported preliminarily, in line with market consensus. The upward revision was concentrated in foreign trade, where both exports and imports were revised lower, but exports less than imports. Trade contributed 0.8 percentage point to growth. Inventories were revised downward, contributing only 0.2 percentage point, down from 0.8 in the advance.
Business fixed investment was also revised upward, to negative 0.2% from negative 2.5% in the advance. Consumer spending, the largest component in the GDP data, was unrevised at 1.0%. Overall, the data are in line with expectations.
The upward revision to growth and especially to final sales (to 3.4% from 2.4%) show more momentum in the economy, suggesting that second-quarter GDP could also come in positive, according to S&P Economics.
Overall, the GDP report had a slightly healthier mix of growth, with more strength coming from final sales and less from inventory investment, wrote Lehman Brothers economist Zach Pandl in a note Thursday. With Q2 GDP now tracking well above zero (0.9% by our estimate), the report will likely intensify debate over whether the economy actually slid into recession in the first half of the year.
Federal Reserve chairman Ben Bernanke said in a speech Thursday that the Fed's liquidity injections have helped stabilize the financial system, but markets are still far from normal.
On Friday, the market will receive reports on U.S. personal consumption expenditures for April, and the May Chicago PMI and Michigan Consumer Confidence surveys.
Among Thursdays stocks in the news, Sears Holdings (SHLD) shares fell after the retailer posted a first-quarter loss per share of 43 cents, vs. $1.45 EPS one year earlier, on 9.
8% lower Sears Domestic same-store sales, 7.1% lower Kmart same-store sales, 8.6% lower total domestic same-store sales, and a 5.8% total revenue drop. The company noted the difficult economic environment and intense competition for consumer business. Sears believes sales and gross margin for the balance of fiscal 2009 will likely continue to be pressured.
Another major retailer had better news. Costco Wholesale (COST) reported third-quarter EPS of 67 cents, vs. 49 cents one year earlier (as adjusted), on 8% higher comparable-store sales and 13% higher total sales.
Shares of MasterCard (MA) shot higher Thu=rsday after the charge-card processor said in an SEC filing that it forecasts long-term average annual net revenue growth between 12%-15% and average annual net income growth in the range of 20%-30%. The company also forecast operating margin improvement of 3%-5%.
Countrywide Financial (CFC) shares moved higher Thursday. S&P MarketScope says the shares were seen higher on a report that Countrywide's credit spreads have tightened.
Packaged-foods giant H.J. Heinz (COST) posted fourth-quarter EPS of 61 cents, vs. 55 cents one year earlier, on an 11% sales rise. For fiscal 2009 and fiscal 2010, the company raised its outlook to annual organic sales growth of 6%+ and EPS growth of 8%-11%. It also raised its annualized dividend 9.2% to $1.66 per share.
Major European equity indexes finished mixed Thursday. In London, the FTSE 100 index fell 0.02% to 6,068.10. In Paris, the CAC 40 index rose 0.10% to 4,975.90. Germanys DAX index gained 0.30% to 7,055.03.
Major Asian indexes closed solidly higher. Japans Nikkei 225 index climbed 3.03% to 14,124.47. In Hong Kong, the Hang Seng index gained 0.55% to 24,383.99.
Treasuries fell sharply as first-quarter GDP was revised up to 0.9% from 0.6%, supporting sentiment that the economy will recover in the second half of the year after a slowdown in the first. Additionally, Dallas Federal Reserve President Richard Fisher said the central bank would increase interest rates sooner rather than later amid high oil prices and other evidence of inflation pressures. The 10-year note was down 22/32 at 98-12/32 for a yield of 4.08%. The 30-year bond was down 38/32 at 93-29/32 for a yield of 4.76%.