Major U.S. stock indexes closed higher in slow pre-Thanksgiving trading Wednesday, rising in step with gains in commodities as favorable reports on home sales, jobless claims, and consumer sentiment fanned optimism that the economic recovery is continuing.
"We had a remarkably heavy calendar of U.S. economic reports [Wednesday] in advance of the Thanksgiving Day holiday, and the array of modest surprises were arguably skewed toward a somewhat improved outlook," said Action Economics chief economist Michael Englund in a note Wednesday.
A weaker dollar contributed to these advances, as it made riskier investments appear more attractive. Keeping stocks' gains in check was a surprise drop in durable goods orders.
U.S. markets will close Thursday for the Thanksgiving Day holiday.
On Wednesday, the 30-stock Dow Jones industrial average finished higher by 30.69 points, or 0.29%, at 10,464.40. The broad Standard & Poor's 500-stock index was up 4.98 points, or 0.45%, at 1,110.63. The tech-heavy Nasdaq composite index gained 6.87 points, or 0.32%, to 2,176.05.
On the New York Stock Exchange, 20 stocks were higher in price for every 10 that declined. Breadth on the Nasdaq was 14-12 negative.
Treasuries were higher after a strong $32 billion auction of seven-year notes Wednesday afternoon. The 10-year note was lower in price at 100-10/32 for a yield 3.345%, while the 30-year bond was lower at 101-10/32 for a yield of 4.300%.
The dollar was skidding Wednesday after the FOMC said Tuesday that its decision to cut interest rates to zero may be fueling undue financial-market speculation even as it called the dollar's slide "orderly." The U.S. dollar index was sharply lower at 74.50.
The steep drop in the dollar index supports the case for further upside in equities, says S&P technical analyst Chris Burba. "Dollar weakness is conducive to carry trades, which involve buying U.S. stocks and other securities with dollars that were borrowed at a low interest rate. As long as asset prices keep rising, interest rates stay down and the dollar value is stable or weakening, the trade stays profitable."
February gold futures were up $19.80 to $1,187.20 per ounce Wednesday afternoon, just below the record high of $1,189.00 reached earlier in the session. In addition to the weaker dollar, gold's rise was also being propelled by a newspaper report that India is open to buying more gold from the International Monetary Fund. Market experts see the yellow metal heading for $1,200 per ounce soon.
January West Texas Intermediate crude oil futures were up $1.34 to $77.36 per barrel in afternoon trading after weekly U.S. inventory data showed crude oil stocks rising 1.0 million barrels in the past week, while gasoline stocks climbed 1.0 million barrels.
European stocks moved higher Wednesday. In London, the FTSE 100 index gained 0.77%. The CAC 40 index in Paris advanced 0.65%. Germany's DAX index rose 0.58%.
Asian markets finished in the green. Japan's Niikei 225 index rose 0.43%. The Hang Seng index in Hong Kong added 0.84%. Shanghai's benchmark index jumped 2.07%.
Among stocks in the news Wednesday, shares of Tiffany & Co. (TIF) gained 4.9% after the company posted third-quarter earnings per share (EPS) from continuing operations of 34 cents, vs. 36 cents EPS one year earlier, on 6% lower same-store sales and 3% lower total sales. Wall Street was looking for EPS of 24 cents. The luxury retailer sees a mid-single-digit percentage increase in worldwide sales for the fourth quarter, with EPS from continuing operations of $1.88-$1.98 (vs. previous guidance of $1.65-$1.75).
Deere & Co. (DE) shares advanced 2.7% after the farm equipment maker posted fourth-quarter non-GAAP EPS of 23 cents on 28% lower worldwide net sales. Deere posted a GAAP loss of 53 cents for the quarter, which includes charges of 76 cents per share, due to the previously announced impairment of goodwill related to John Deere Landscapes reporting unit and voluntary employee-separation expenses associated with the formation of the new agriculture and turf division. Deere expects company equipment sales to be down 1% for fiscal 2010, and down about 10% for the first quarter of fiscal 2010.
J. Crew Group (JCG) rose 7.8% after the company reported third-quarter EPS of 67 cents, vs. 30 cents EPOS one year earlier, on an 8% same-store sales rise and a 14% total sales rise. The apparel retailer sees fourth-quarter EPS of 37 cents-42 cents.
TiVo Inc. (TIVO) fell 6.8% after reporting a third-quarter loss of 6 cents per share, vs. EPS of 98 cents (including EchoStar litigation related items) on a 12% revenue drop. General Dynamics (GD) was up 1.2% after it announced that the U.S. Army TACOM Life Cycle Management Command has awarded a $2.2 billion contract to General Dynamics Land Systems-Canada for 724 Light Armored Vehicles for a foreign military sale. Vehicle deliveries will begin in April 2011.
Diedrich Coffee (DDRX) said its board has determined that the recently revised offer from Green Mountain Coffee Roasters (GMCR) continues to be a superior merger proposal to the terms of an offer from Peet's Coffee & Tea (PEET). Green Mountain has offered to buy all the outstanding shares of Diedrich for $32 per share in cash. Peet's recently proposed to acquire Diedrich for a combination of $19.80 in cash and 0.321 of Peet's stock for each Diedrich share.
Diedrich shares lost 2.0% in Wednesday's session, while Green Mountain fell 0.9% and Peet's gained 2.0%.
In economic news Wednesday, U.S. new home sales rose 6.2% to a 430,000-unit annual pace in October, following a revised 405,000 pace in September (from 402,000). Strength was seen only in the South where sales climbed 23.2%; declines were seen in the West (-5.1%), the Northeast (-5.1%), and the Midwest (-20.0%). The months' supply of unsold homes dropped to 6.7 months (the lowest since December 2006) from 7.4 (revised from 7.5). The median sales price rose to $212,200, from an upwardly revised $210,700 (was $204,800).
U.S. consumer sentiment improved to 67.4 in the final November reading from the University of Michigan survey, following the drop to 66.0 in the preliminary report. The index was 70.6 in October and hit a high for the year t 73.5 in September. The current conditions component remained soft, falling to 68.8 versus the 69.6 preliminary (73.7 October). The future index jumped to 66.5 from the preliminary 63.7 (68.6 October).
U.S. durable goods orders fell 0.6% in October following an upwardly revised 2.0% in Sepember (was 1.4%). Transportation orders clmibed 1.5%, while orders excluding transportation declined 1.3%. Non-defense capital goods orders excluding aircraft declined 2.9%, erasing September's 2.6% gain. Shipments dipped 0.2% following a 1.6% increase in September. Inventories were flat. The inventory-sales ratio was steady at 1.75 (September's 1.77 was revised down).
U.S. initial jobless claims were down 35,000 to 466,000 in the week ended November 21 from a revised 501,000 (was 505,000) the week before. That is the lowest level since the September, 2008 week. Continuing claims declined a large 190,000 to 5,423,000 in the week ended November 14, from a revised 5,613,000 (was 5,611,000) the week before.
"The data are much better than expectations, and should weigh on Treasury yields, and the dollar, and support Wall Street," says Action Economics.
U.S. personal income rose 0.2% in October, and spending increased 0.7%. September's flat income reading was revised up to 0.2%; the 0.5% dip in spending in September was revised lower to -0.6%. Wages and salaries were flat last month and disposable income rose 0.4%. The savings rate slowed to a 4.4% clip from 4.6%. The PCE price index rose 0.3% on the month, and is up 0.2% year-over-year following five months of declines. The core PCE deflator edged up 0.2% in October and accelerated to a 1.4% year-over-year rate vs. 1.3% previously.