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While you were sleeping: Jobless claims lift mood

Friday 15th May 2015

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Wall Street rose after better than expected jobless claims data and an unexpected decline in producer prices suggested the US economy is growing at a pace that is unlikely to warrant an interest rate increase soon. 

In late trading in New York, the Dow Jones Industrial Average added 0.98 percent, the Standard & Poor’s 500 Index climbed 1.01 percent, while the Nasdaq Composite Index advanced 1.29 percent. Also helping stocks was a gain in US Treasuries, stemming a recent run-up in bond yields globally.

“The bond markets are stabilising and jobless claims were positive, so it’s giving a more positive spin to the day today,” Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments, told Bloomberg. 

Gains in shares of Microsoft and those of Apple, both up 2.3 percent recently, led the Dow higher. The Dow rose as high as 18,254.37, inching closer to its record high of 18,288.63.

A Labor Department report showed initial claims for state unemployment benefits unexpectedly declined, falling 1,000 to a seasonally adjusted 264,000 for the week ended May 9. Separately, the Labor Department’s producer price index for final demand also posted a surprise drop, declining 0.4 percent in April.

The data add to recent evidence, such as Tuesday’s disappointing retail sales report for April, that there’s little pressure on the Federal Reserve to raise interest rates in the immediate future.

"Despite an even tightening labour market, inflation is totally under control, complicating the Fed's decision making," Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania, told Reuters. "The Fed must keep its finger on the trigger, even if it doesn't have to pull it just yet."

Indeed, “we find support for our expectations that the Fed will not raise rates until Q4 2015,” Jason Schenker, chief economist and president of Prestige Economics in Austin, Texas, wrote in a research note, according to Bloomberg.

Shares of Shake Shack initially jumped 6.5 percent after the company unexpectedly reported a quarterly profit and upgraded its full-year revenue forecast. The stock recently traded up 0.5 percent. 

Shares of Kohl’s sank, last trading 12 percent lower, after the department store posted weaker-than-expected sales for the quarter. It followed disappointing sales from rivals Macy’s and JC Penney, and underpinned concern about the pace of US consumer spending.

"Weather, port issues, and weak consumer spending overall is the department store theme in 1Q, despite a plan to recover traffic, it does not appear that KSS escaped the trend," Evercore ISI analyst Matt McGinley wrote in a note, according to Reuters.

In Europe, the Stoxx 600 Index finished the session with a 0.6 percent increase from the previous close. The UK’s FTSE 100 Index rose 0.3 percent, France’s CAC 40 Index added 1.4 percent, while Germany’s DAX rallied 1.8 percent.

 

 

 

 

BusinessDesk.co.nz



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