Wall Street Opens Well Despite US Jobless Claims Data

Posted on | December 10, 2009 |

Wall Street opened very strongly this afternoon, with the DJIA quickly ratcheting up 100 points of gains (around 1%) within 10 minutes of the open on the NYSE.

This came despite news from the US Labor Department that jobless claims were higher than expected for last week, with the number of workers making new benefit claims jumping by 17,000 to a seasonally-adjusted 474,000.

445,000 had been the consensus expectation of a Bloomberg survey prior to the release. This was the first time the number of initial claims has risen in over month.

Reuters reported a Labor Department economist as saying that claims had been affected by seasonally-driven layoffs as well as by applications postponed by the Thanksgiving holiday.

Of course, the fact that the figures are already seasonally-adjusted should make you take this qualification with a pinch of salt.

A Reuters survey ahead of the announcement had forecast a widening of the gap from $35.6 billion to $26.8 billion, but the actual figure showed the trade gap shrinking 7.6% to £32.9 billion. Among the areas of US export-growth were civilian aircraft and pharmaceutical products.

These burgeoning signs of demand are evidence of the ongoing recovery of the global economy, and in my opinion they are positive in terms of fourth-quarter US growth and can be seen to some degree as a vote of confidence for the Obama-Biden administration, which has previously cited export growth as a potential source of job creation.

There was similar evidence in Canada’s trade balance figures which were also released at 1.30pm, showing an unexpected trade surplus for October of C$428 million, with exports boosted by sales of fuel and metals to the US.

This follows three months of consecutive deficits for Canada. In the wake of the announcement, USD/CAD dropped to around C$1.0480, a decline for the US Dollar of around 0.6% from yesterday’s close.

These fairly clear signs of improvement in the state of the North American economies were evident in the levels of the benchmark stock indices. As well as the resurgent Dow Jones, the wider S&P 500 index skipped up 7 points or 0.65% to 1102, while the NASDAQ 100 gained a similar percentage to stand at 1802 about an hour after the opening.

General Electric announced today that it has landed a $1.4 billion contract from Caithness Energy to supply wind turbines in Oregon, in what could turn out to be the largest wind farm in the world, with a total of 338 turbines set to be put in by 2012.

General Electric shares hit a high of $15.85 but by 4.00pm London time were trading at $15.67, up just a cent on the day.

Eastman Chemical gained more than 0.3%, climbing up to a price of $59.40, after Goldman Sachs issued a ‘buy’ recommendation for its shares.

In Europe stock markets held steady on the gains from their morning trading sessions, with the FTSE 100 up just under 0.6%, while the German DAX and the French CAC-40 both gaining around 0.7%.

Banks continued to fuel many of the gains, with Lloyds Banking Group improving by more than 5% and Barclays adding around 3.5% today.

So all in all, stock markets are looking fairly positive today, encouraged by the latest glimpses of macro-economic recovery.

There may be more tomorrow, with key US retail sales figures for November due out at 1.30pm London time. They are anticipated to rise by 0.6%, which would be a slowing in sales from the 1.4% increase seen in October. [1]

Consumer spending constitutes a large part of the US economy and this data covers the significant period of the Thanksgiving holiday sales. We can therefore hope for some major insights into the state of the US recovery.

[1] Source: Bloomberg survey

By Peter Martin, Director, Client Education and Training, IG Index.

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