Major U.S. stock indexes closed higher Thursday for the first time in three sessions. The market was bolstered by bargain hunting and a pullback in oil prices, which helped ease investors' inflation worries, according to S&P MarketScope. Thursday's rally preceded Friday's expiration of options.
Market players weighed a surprisingly large jump in consumer-level inflation in July and a small decline in first-time unemployment filings.
Bonds were higher. The dollar index was higher. Gold futures and oil futures were lower.
On Thursday, the Dow Jones industrial average finished higher by 82.97 points, or 0.72%, at 11,615.93. The broader S&P 500 added 7.10 points, or 0.55%, to end at 1,292.93. The tech-heavy Nasdaq composite index gained 25.05 points, or 1.03%, to close at 2,453.67.
On the New York Stock Exchange, 20 stocks advanced in price for every 11 that fell. The ratio on the Nasdaq was 17-11 positive. Consumer Discretionary stocks up. Energy stocks off.
Financials and stocks tied to autos were among the day's best performers. The S&P Auotombile index gained 5.68% after General Motors (GM) made public its latest designs of the Chevrolet Volt, its electric car.
The S&P Homebuilding index rose 4.48% after a report from the National Association of Realtors that said existing-home sales rose from the first quarter in 13 states, according to the NAR's latest survey.
The government’s consumer price index for July showed a jumbo 0.8% increase in the headline inflation figure, more than the 0.4% expected by the market. Excluding food and energy, prices rose 0.3%, slightly more than the 0.2% consensus. Energy prices surged 4.0%, and food was up 0.9% in the month. Energy prices were up 29.3% from a year ago, and food 6.0%.
Excluding food and energy, the core CPI was up 2.5% from a year ago, continuing its recent acceleration and well above the Fed's 2.0% top target. The total CPI is up 5.6% from a year ago -- the largest year-over-year gain since the 1991 Gulf War -- well above the 3.4% rise in earnings reported for the month.
Apparel prices jumped 1.2% in July, but remain up only 0.8% on the year. Medical care slowed to a 0.1% rise in July.
“The data are higher than expected and should push Treasury rates higher, although with energy and other commodity prices having come down, the markets may discount some of these data as old news,” wrote Action Economics analysts in an Aug. 14 website posting.
According to a Labor Dept. report, initial claims for unemployment insurance benefits fell 10,000 in the week ending Aug. 9, to 450,000, but above the drop to 445,000 that markets had expected. The 4-week average jumped 19,500 to 440,500, moving over the 400,000 level that is consistent with recession. The number of people receiving benefits surged 114,000 to 3.417 million, pushing the insured unemployment rate up 0.1%to 2.6%.
The claims data may be distorted by the extension of benefits recently passed by Congress, which has caused some unemployed to reapply, according to an Aug. 14 note from S&P Economics. “Still, the level is holding above 400,000, and it seems to reflect mostly labor market weakness.”
Traders were awaiting Friday’s data on U.S. industrial production in July and the August University of Michigan consumer sentiment index.
According to a Dow Jones Newswire report, after weeks of deliberation, the Securities Industry and Financial Markets Association decided to allow newly originated jumbo loans to be included in the to-be-announced market for mortgage-backed securities. This is expected to lower mortgage rates borrowers pay on jumbo loans without impacting the rates on regular-sized loans. So far, only conforming loans that can be guaranteed by Fannie Mae (FNM) and Freddie Mac (FRE) have been traded in this market, which relies on the homogeneity of loans since investors are buying them without knowing the specifics of the loans.
September West Texas Intermediate crude oil futures were down $1.00 to $115.
00 per barrel Wednesday afternoon, but up from the session low of $112.59. Trading was volatile before options expiry on Friday.
Among stocks in the news Thursday, Wal-Mart (WMT) posted 86 cents vs. 75 cents second quarter EPS from continuing operations on 4.5% higher total U.S. sales without fuel, 5.0% higher with fuel, 10% higher total company sales. The company sees third quarter U.S. same-store sales increase of 1%-2%, which continues to reflect some sales volatility from week to week, EPS from continuing operations of 73-76 cents. Wal-Mart raised its fiscal 2009 EPS from continuing operations forecast to $3.43-$3.50.
J.M. Smucker (SJM) posted 82 cents vs. 72 cents first quarter EPS (excluding costs) on an 18% sales rise. The company sees $3.45-$3.50 2008 EPS (excluding costs) on $3.8-$4.0 billion in sales.
Estee Lauder (EL) posted 61 cents vs. 45 cents fourth quarter EPS on a 14% sales rise. The company sees 18-25 cents first quarter EPS, 9%-11% sales growth (in constant currency), and $2.57-$2.72 fiscal 2009 EPS on 6%-8% sales growth (in constant currency).
Skechers (SKX) offers to buy Heelys (HLYS)
for $5.25 per share in cash, or an aggregate of $142.8 million.
Invesco (IVZ) will be added to the S&P 500 index, replacing IAC/InterActiveCorp (IACI) on Aug. 20. IACI is spinning off the businesses of HSN, Interval Leisure Group, and Ticketmaster in a transaction expected to be completed after the close of trading on that date.
Dendreon (DNDN) has initiated its second of two new Phase 2 trials of PROVENGE (sipuleucel-T), its investigational active cellular immunotherapy for the treatment of advanced prostate cancer. The multicenter trial, called ProACT (PROstate Active Cellular Therapy), has begun enrolling 120 patients with metastatic, androgen independent prostate cancer.
Major European stock indexes finished higher Thursday. In London, the FTSE 100 index gained 0.9% to 5,497.40. In Paris, the CAC 40 index added 0.41% to 4,420.91. Germany’s DAX index rose 0.31% to 6,442.21.
Asian indexes finished mixed Thursday. Japan’s Nikkei 225 index fell 0.51% to 12,956.80. In Hong Kong, the Hang Seng index gained 0.47% to 21,392.71.
Bonds moved higher in price Thursday. The 10-year Treasury note was higher at 100-28/32 for a yield of 3.899, while the 30-year bond rose to 99-20/32 for a yield of 4.527%.