Stocks Weigh Gains After Large Serving of Domestic Data
U.S. stocks posted modest gains ahead of tomorrow’s Thanksgiving holiday, on which all domestic markets will be closed. Equities found support from a profusion of mainly upbeat domestic reports, including an unexpected drop in jobless claims and a larger-than-forecasted upward revision to consumer sentiment.
Treasuries were mostly lower following the domestic data, which also included a smaller-than-expected deceleration in regional manufacturing growth, and a fourth-straight month of improvement for Leading Indicators.
The Dow Jones Industrial Average (DJIA) was 25 points (0.2%) higher at 16,097-
The S&P 500 Index increased 4 points (0.2%) to 1,807-
The Nasdaq Composite gained 27 points (0.7%) to 4,045-
In light volume, 522 million shares were traded on the NYSE, and 1.5 billion shares changed hands on the Nasdaq. WTI crude oil fell $1.38 to $92.30 per barrel, wholesale gasoline gained $0.01 to $2.69 per gallon, and the Bloomberg gold spot price declined $4.44 to $1,238.41 per ounce.
Durable goods orders and jobless claims fall, while consumer sentiment revised higher
Durable goods orders dropped 2.0% month-over-month in October, inline with the estimate expected by economists surveyed by Bloomberg, but September’s 3.7% rise was revised to a 4.1% gain. The report was disappointing, although it may be discounted somewhat by traders, as the report tends to be volatile on a month-to-month basis, and the report covered the period during which the government was shutdown.
Most experts still feel economic data is still a bit lumpy from the government shutdown, but overall the data is starting to clear and is continuing to reveal a modest growth story, showing neither recession nor overheating growth. As such, the Fed is unlikely to move quickly to tighten monetary policy, although cutting back on asset purchases is likely in 2014 and as the Fed begins to prepare the market for this move, the market could encounter increased volatility. Although most analysts remain optimistic on U.S. stocks, there is the risk of a pullback in the near term should sentiment conditions continue to be elevated.
Meanwhile, weekly initial jobless claims declined by 10,000 to 316,000 last week, below the 330,000 level that economists expected, as the prior week’s figure was upwardly revised by 3,000 to 326,000. Moreover, the four-week moving average, considered a smoother look at the trend in claims, fell by 7,500 to 331,750, while continuing claims dropped by 91,000 to 2,776,000, south of the forecast of economists, which called for a level of 2,850,000.
Also, the final University of Michigan Consumer Sentiment Index showed confidence was revised higher than expected to 75.1 in November from the preliminary reading of 72.0, and compared to the 73.1 estimate of economists surveyed. The November figure was also an improvement from October’s 73.2 reading but was below July’s six–year high of 85.1. Both the economic conditions and outlook components of the survey were adjusted higher. On inflation, the 1-year expectation was revised to 2.9% from 3.1%, compared to October’s 3.0% reading, while the 5-year inflation outlook remained at 2.9%, from the 2.8% figure posted in the previous month.
Treasuries were mostly lower following the data, with the yield on the 2-year note nearly unchanged at 0.29%, while the yield on the 10-year note rose 3 bps to 2.74%, and the 30-year bond rate increased 1 bp to 3.81%.
Europe higher, Asia mixed
The European equity markets traded to the upside, with traders digesting the mostly upbeat plethora of economic data in the U.S., while trading may have been muted ahead of the U.S. Thanksgiving holiday tomorrow. Meanwhile, Germany’s GfK Consumer Confidence Index unexpectedly improved to help buoy sentiment, rising to 7.4 for December—the highest reading since August 2007—from 7.1 in November, where economists expected the index to remain. In other economic news, U.K. 3Q GDP was left unrevised at a rate of expansion of 0.8% quarter-over-quarter, as expected, while French consumer confidence surprisingly declined for November and Spanish retail sales fell in October.
Stocks in Asia finished mixed in subdued action ahead of tomorrow’s holiday in the U.S. Japan’s Nikkei 225 Index finished lower, though losses for the index were limited by some weakness in the yen versus the U.S. dollar. Stocks in China rose amid optimism about the government’s reform measures in the financial sector and a report suggesting the nation will build a new railway linking Hungary and Serbia, which boosted train-related stocks.
Chinese equities showed some resiliency in the face of rising political tensions pertaining to the nation’s recent establishment of a new air defense zone in the East China Sea. Australia’s S&P/ASX 200 Index declined and India’s S&P BSE Sensex 30 Index finished flat, while South Korea’s Kospi Index advanced shrugging off a disappointing report on the outlook for the nation’s manufacturing sector activity. Finally, Thailand’s SET Index advanced despite continued anti-government protests in the region, after the Bank of Thailand unexpectedly cut its benchmark interest rate by 25 bps to 2.25%.