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VOL. 37 | NO. 16 | Friday, April 19, 2013




Stocks up as job market improves; stimulus chatter

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NEW YORK (AP) — U.S. stocks moved higher Thursday after claims for unemployment benefits fell and name-brand companies like Royal Caribbean and Harley-Davidson reported healthy profits.

At mid-afternoon, all three major U.S. indexes were up. It was the fifth straight day of gains for the Standard & Poor's 500, a record not matched since early March.

Market watchers were quick to point out that the engines driving the stock market gains were more tenuous than turbocharged. The drop in weekly unemployment claims follows a month where U.S. job creation dropped off a cliff. The S&P's five-day winning streak is coming in just under the wire: Wednesday's gain was an unimpressive 0.01 point. And in the middle of the first-quarter earnings season, though most companies have beat analysts' expectations on profit, most are missing on revenue.

Scott Freeze, president of Street One Financial in Huntingdon Valley, Pa., thought Thursday's rise had more to do with investors believing that the world's central banks will continue with their policies of easy money, rather than any notable change in how people viewed the economy.

The market, he said, is "slowly melting up on basically nothing."

"Some of the earnings were OK, but it's more just stimulus, stimulus, stimulus," Freeze said. "As long as the world wants to print (money) ... the fears of a global slowdown are going to be muted."

Joe Heider, principal at Rehmann Group outside Cleveland, thought stocks were up mostly because investors can't think of anywhere else to put their money.

"You can leave it in cash and make nothing on it," Heider said. "You can put it in bonds and earn nothing."

Heider said he thought the latest report on jobless claims was consistent with an economy that was improving, but only incrementally. Weekly applications for unemployment benefits fell 16,000 to 339,000, the second-lowest level in more than five years, according to the Labor Department.

The job market has suffered some recent setbacks. In March, employers added only 88,000 jobs, down from an average of 220,000 for the previous four months. The unemployment rate fell to 7.6 percent from 7.7 percent, but only because more people stopped looking for jobs.

"This is kind of a plodding recovery," Heider said Thursday, after the Labor Department report. "Not booming, not exciting, but we just keep marching forward."

At mid-afternoon, the Dow Jones industrial average was up 80 points to 14,757, a gain of 0.6 percent. The Standard & Poor's 500 was up 12 at 1,591, or 0.8 percent. The Nasdaq composite index was up 29 to 3,298, or 0.9 percent.

Thursday's earnings offered a mixed view of the economy, and mixed reactions from investors. Many companies have been reporting better first-quarter results, but not necessarily because of stronger economic conditions.

So far this season, 71 percent of S&P 500 companies have beat analysts' profit expectations, according to John Butters, senior earnings analyst at FactSet. But that has come more from cost-cutting than from business going gangbusters: Fifty-six percent of the S&P 500 companies have missed estimates for revenue. The effect on the stock prices has been unpredictable.

Dow Chemical, which reported results Thursday, was one example. The company managed to increase profits even as revenue slipped because it cut costs and paid down debt. The stock was up 6 percent at $34.10.

Safeway, a major grocery store chain, reported higher profit with the help of tax benefits but lower revenue, which missed analysts' expectations. Its stock plunged 14 percent to $24.40, with investors concerned about competition from dollar stores and big-box retailers.

In a report to clients Thursday morning, ConvergEx Group analyst Nicholas Colas noted companies' higher earnings but said they don't match the "real feel" of an economy still crimped by "lackluster jobs growth, a flattening rate of improvement in the housing market, and incremental government austerity measures."

"If U.S. companies have proven anything in the last four years of subpar macroeconomic results," Colas wrote, "it is that they can make gallons of lemonade from just a few shriveled bits of citrus."

Among other companies making big moves:

Children's clothing company Carter's and motorcycle maker Harley-Davidson were both up after reporting higher profit and revenue. Carter's rose 6.5 percent to $64.44. Harley rose 4 percent to $55.33.

Profit and revenue also rose at 3M, maker of Scotch tape and construction equipment. But the stock was down 3 percent at $104.51. Investors were unnerved when the company cut its profit predictions for the year, citing a "low-growth economic environment."

Cosmetics company Revlon reported a loss after taking a charge for refinancing. Revenue was virtually flat. The stock dropped 10 percent to $18.55.

Profit and revenue also fell at Cliffs Natural Resources and Carbo Ceramics, but their stocks went in opposite directions. Cliffs, which sells iron ore, shot 19 percent higher to $21.66. Carbo, which provides services and parts for the petroleum industry, plunged 15 percent to $73.43.

At Cliffs, the lower profits were still better than analysts had expected. At Carbo, investors were worried because the company said Chinese ceramic imports were hurting its pricing, and because drilling companies were taking more rigs out of action.

In other markets, trading resumed on the Chicago Board of Options Exchange at 1 p.m. Eastern after being shut down all morning because of software problems. The CBOE's VIX index, a measure of how volatile investors expect the market to be, fell 3.5 percent to 13.14, close to its low point of the year, 11, reached on March 15.

Gold futures rose 2.7 percent to $1,462 an ounce and the price of crude oil rose 2.1 percent to $93.52 a barrel. The yield on the benchmark 10-year Treasury note edged up to 1.72 percent from 1.71 percent.

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