Drop in Jobless Claims Fuels Continuing Rally
Investors found more reason to hopeful about the economy.
In a welcome surprise for Wall Street on Thursday, the Labor Department said initial claims fell last week by 14,000 to 631,000. Economists had predicted an increase.
A reading on midwest business conditions also showed a strong improvement in April.
Not all data were positive — continuing jobless claims jumped to a new record, and the government also reported a slightly larger-than-expected decline in personal spending and incomes. Still, the pullback in spending was not a shock, particularly after two months of gains.
Thursday’s readings bolstered investors’ growing belief that the U.S. economy, while not yet healthy, is nearing a bottom. The stock market surged more than 2 percent Wednesday after the Federal Reserve said the contraction appears to be slowing.
Investors know the stock market usually rebounds before the economy does, and they do not want to miss out on a rally. The Dow Jones industrial average is already up 25 percent from its 12-year low in early March.
“Recovery seems to be in the air, and the market is now a forward-looking market,” said Peter Cardillo, chief market economist at the brokerage house Avalon Partners Inc. “A feeling of being left behind seems to be pushing the market higher.”
Earnings reports have also been beating expectations over the past few weeks. On Thursday, many companies reported profit declines — including Dow Chemical, Newell Rubbermaid and Newmont Mining — but their results topped analysts’ forecasts. And Motorola Inc.‘s first-quarter loss was smaller than analysts predicted.
In midmorning trading, the Dow Jones industrial average rose 86.97, or 1.1 percent, to 8,272.70.
Broader stock indicators also rose. The Standard & Poor’s 500 index rose 10.52, or 1.2 percent, to 884.16, and the Nasdaq composite index rose 29.97, or 1.8 percent, to 1,741.97.
The Russell 2000 index of smaller companies rose 6.83, or 1.4 percent, to 498.30.
Four stocks rose for every one that fell on the New York Stock Exchange, where volume came to 202.8 million shares.
Investors appeared unfazed by news Thursday that Chrysler LLC might be on the brink of bankruptcy. Talks have disintegrated between the Chrysler’s lenders and the government, a person familiar with the matter said, over the automaker’s debt.
In other economic news, the Chicago Purchasing Managers’ index, which measures business conditions across Illinois, Michigan and Indiana, jumped to 40.1 in April from 31.4 in March. The index is considered a precursor to the Institute for Supply Management’s manufacturing index, which is due Friday.
Despite burgeoning confidence about the economy, worries about the instability of banks still dog investors. At Bank of America Corp.‘s annual shareholders meeting Wednesday, shareholders stripped CEO Ken Lewis of his chairman role. Many of the shareholders who spoke at the meeting complained about the bank’s purchase of the troubled investment bank Merrill Lynch. Bank of America rose 35 cents, or 4 percent, to $9.03.
U.S. government bond prices rose. The yield on the 10-year Treasury note slipped to 3.10 percent from 3.11 percent late Wednesday. Yields move opposite to prices.
The dollar was mixed against other major currencies. Gold prices fell.
Light, sweet crude slipped 12 cents to $50.85 a barrel on the New York Mercantile Exchange.
Overseas, Japan’s Nikkei stock average jumped 3.9 percent. In afternoon trading, Britain’s FTSE 100 rose 1.6 percent, Germany’s DAX index rose 2.1 percent and France’s CAC-40 rose 1.8 percent.
4/30/2009 10:18 AM MADLEN READ AP Business Writer NEW YORK