Stocks rose today as hopes of an improving labor market and clarification about France's AAA credit rating buoyed investor sentiment. Also Italy's bond yields fell below 7%.
For the first time since April 2011, initial unemployment claims came in at 390,000 after 397,000 were expected. This is the second week in a row under 400,000.
Very interesting article on the stock market trends>Is it 1973 all over again?
Here are the top financial stories of the day:
1) Easing Italian bond yields lift futures-From Reuters
Stock index futures rose on Thursday, indicating the S&P 500 may bounce back from its worst day since mid-August as Italian bond yields eased.
Traders said the European Central Bank increased its bond buying, but the ECB's hard-line chief economist told governments not to expect the bank to rescue them with unlimited funds. A pullback in Italian bond yields helped support market sentiment.
Italy paid its highest yield in 14 years to sell 12-month debt on Thursday, and although there was relief the sale went smoothly, worries remained that Italy's borrowing costs were unsustainable.
"We are having a little bit of a bounce. The fact that Italy managed to sell its debt under 7 percent at 6.9 percent is easing some fears after the rates climbed above 7 percent yesterday," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
"There are hopes this political crisis in Italy will soon be solved."
Former European Commissioner Mario Monti has emerged as the favorite to replace Silvio Berlusconi and form a new government.
Italy, the region's third-largest economy, has replaced Greece at the center of the European debt crisis storm, with the country's borrowing costs at unsustainable levels and Europe unable to afford a bailout.
European shares rose 0.5 percent in choppy trade, while Asian stocks fell on fears over Europe. and (.EU)
S&P 500 futures rose 14 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration of the contract. Dow Jones industrial average futures climbed 106 points, while Nasdaq 100 futures gained 26.25 points.
The S&P 500 saw its worst daily percentage drop since August 18 on Wednesday. All 10 S&P sectors closed down, with S&P financials (.GSPF) the hardest hit.
Cisco Systems Inc (NasdaqGS:CSCO) jumped 6.6 percent to $18.78 in premarket trade after the world's biggest networking equipment maker forecast revenue and earnings above expectations for its fiscal second quarter.
After the closing bell, Walt Disney Co (NYSE:DIS) and Nvidia Corp (NasdaqGS:NVDA) are due to post quarterly results.
Disney will seek to reassure Wall Street that global economic woes have not hurt its nearly $11 billion parks and resorts business or held back an advertising rebound at ESPN and its other cable networks.
First-time claims for jobless benefits for the week ended November 5 and import-export prices for October from the Labor Department are due at 8:30 a.m. EST (1330 GMT). Economists in a Thomson Reuters survey forecast a total of 400,000 new filings, compared with 397,000 in the prior week.
Also at 8:30 a.m (1330 GMT), the Commerce Department releases September international trade figures.
2) Jobless claims fall, September trade gap narrows-From Reuters
New U.S. claims for unemployment benefits fell last week to their lowest since early April and the trade deficit unexpectedly shrank in September, pointing to a slight improvement in the economy.
The Labor Department said initial claims for state unemployment benefits fell for the second straight week, down 10,000 to a seasonally adjusted 390,000.
The U.S. labor market is still a long way from recovering from the deep 2007-2009 recession, but analysts said the data at least reinforced the view that the healing process was continuing.
"Clearly, the labor market is improving, but at a very slow pace," said Omer Esiner, chief market strategist at Commonwealth Foreign Exchange in Washington.
In a separate report, the Commerce Department said the seasonally adjusted U.S. trade deficit shrank to $43.1 billion in September.
That was its narrowest since December thanks to record-high exports and suggests the U.S. economy closed the third quarter a little stronger than many expected.
Also, imports from China fell 2.5 percent from a month earlier, although that reading was based on non-seasonally adjusted figures.
Prices for U.S. government debt extended losses on the claims and trade data.
Investors remain focused on the unfurling debt crisis in Europe, which economists say could easily send the United States back into recession.
Weekly jobless claims still remain well above pre-recession levels and have dipped below 400,000 -- a threshold many economists believe signifies improving labor market conditions -- only 10 times over the past year.
A Labor Department official said a freak fall snowstorm that kept many people housebound in the Northeast did not affect initial jobless claims.
3) Is it 1973 all over again? From Market Watch
Wednesday’s bad break has the bears bugalooing. But one judicious bull is standing firm.
A really scary comment from Elliott Wave Theorist’s Bob Prechter: “In my judgment, the situation is very like that of 1973. …The market has been in a two-year bear market rally, per our interpretation of the Elliott Wave model; and a broad bullish consensus had developed on stocks, recalling January 1973’s ‘Not A Bear Among Them’ headline from Barron’s.”
“In 1973, the stock market topped in January and was weak into August; then it rallied hard right through September and October, statistically the two most bearish months of the year. It was a convincing rally and optimism returned. That rally ended on Oct. 31, leaving the ‘bear months’ in the dust.
But instead of continuing higher, the market turned lower, and in just a month plunged below its August low. November is usually a benign month, but that year it wasn’t…”
Prechter was quick to add: “None of this PROVES anything. Today’s huge intraday TICK and TRIN [two technical indicators] numbers, in fact, would usually be associated with a near-term bottom, so there is plenty of room for uncertainty. But the main exception to that tendency occurs at the kickoffs of major declines, and that’s how the waves seem to be positioned.”
A whole generation of investors has grown up thinking Prechter has always been bearish. But this has not always been so, and anyway the Crash of 2008 (after which his letters were briefly bullish) nearly got him onside. (See Oct. 13 column.)
Dennis Slothower of Stealth Stock Daily Alert, who also dodged the Crash of 2008, isn’t always bearish either. But bearishness has worked for him this year. (See Oct. 6 column.).
He said flatly last night: “Given the horrible developments in Europe and the chaos we are likely to see in the next few weeks as details emerge from the ‘Super Committee,’ it would not surprise me to see a 50% or 61.8% retracement off the October rally, which would be another 4%-6% drop from here.”
Slothower is currently 100% in cash.
But Cabot Market Letter, which has shown itself to be wedded to neither side of the market, is not yet ready to give up on its recent bullishness. (See Sept. 29 column.).
It wrote last night: “We’re not downplaying today’s action, which did plenty of damage and, if nothing else, is a warning shot. But, as extreme as it was, today didn’t change the general market picture — the market is still attempting to repair the damage from the August-to-early-October crash, but remains as news-driven and volatile as we can remember. There’s been enough evidence to put a few lines in the water, but no money is being made on the long side (unless you’re a day trader), which argues for holding a good chunk of cash. We still have about 50% cash in the Model Portfolio, and today is a good reason why.”
“Overall, we still think that a 50-50 approach (about half in, half out of the market) is prudent. If today ends up being the start of a new leg down, we’ll back off and raise even more cash. But if the market and leaders hang in there and eventually get going on the upside, we’ll extend our line. For now, though, we’ll sit tight and see what comes.”
Quote of the Day from Dave Ramsey.com:
...failing doesn't make you a failure. Giving up, accepting your failure, refusing to try again, does! — Richard Exley
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