U.S. stocks advance as jobless claims drop to 4-year low

STOCKS ROSE IN THE U.S. as American jobless claims slid to a four-year low.
Posted 10/11/12

NEW YORK - U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for the first time in five days, as American jobless claims slid to a four-year low and Italy’s bond yields fell after a debt sale.

Bank of America Corp. and JPMorgan Chase & Co. advanced at least 1 percent after a report the European Union may push back the deadline for applying tougher Basel bank-capital rules for as long as a year. Commodity and financial stocks posted the biggest rallies out of 10 groups in the S&P 500. Sprint Nextel Corp. jumped 13 percent as it confirmed it’s in talks with Japan’s Softbank Corp. about a potential transaction.

The S&P 500 added 0.4 percent to 1,437.85 at 12:26 p.m. in New York. The benchmark gauge fell to the lowest level in a month yesterday on concern that the global economy is slowing down and will hurt corporate earnings. The Dow Jones Industrial Average rose 23.85 points, or 0.2 percent, to 13,368.82 today. Trading in S&P 500 companies was 20 percent above the 30-day average at this time of day.

The claims report “is consistent with the improving jobs numbers and consumer confidence we’ve been seeing,” Brian Gendreau, a market strategist at El Segundo, California-based Cetera Financial Group Inc., said in a telephone interview. The firm has about $20 billion in assets under management. “It just adds to the picture of a U.S. economy that’s recovering. Not as fast as anyone would like, but still improving.”

Stocks extended gains after Labor Department figures showed fewer Americans than forecast filed first-time claims for unemployment benefits last week. Applications for jobless benefits dropped 30,000 to 339,000 in the week ended Oct. 6, the fewest since February 2008. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey.

One state

One state accounted for most of the plunge in claims, a Labor Department spokesman said. The breakdown by state will show up in next week’s report.

“The economy is improving, we’re doing a better job,” Philip Orlando, the New York-based chief equity strategist at Federated Investors Inc., which oversees about $370 billion, said by phone. “I think we should be going faster but this is a phenomenal claims number. So now the question is, ‘Is this number real or is it going to get revised away next week?’”

A report showed the U.S. trade deficit widened by 4.1 percent to $44.2 billion from $42.5 billion in July as slower global growth reduced demand for American exports, Commerce Department figures showed.

Moderate expansion

The Federal Reserve said yesterday that the U.S. economy expanded “modestly” last month, supported by improvements in housing and auto sales, even as the labor market showed little change. The S&P 500 has slipped 1.7 percent since reaching an almost five-year high of 1,465.77 on Sept. 14. The benchmark index is still up 15 percent for the year.

Stocks were also bolstered today as strategists at Citigroup Inc. upgraded U.S. equities to overweight, citing “aggressive” central-bank stimulus plans and strong momentum in companies’ earnings per share. They also predicted a 9 percent rally in the MSCI All-Country World Index by the end of next year.

European equities climbed earlier as Italy sold 3.75 billion euros ($4.8 billion) of its benchmark three-year bonds at 2.86 percent. Investors bid for 1.67 times the amount offered, up from 1.49 times last month. S&P yesterday cut Spain’s debt rating to one level above junk, citing economic and political risks as the government considers a second bailout.

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