Stocks gain after unemployment claims fall
NEW YORK (AP) -- Encouraging news about the job market and higher profits from CBS, Facebook and other companies lifted stocks Thursday.
Signs of increased hiring have supported this year’s surge in stocks and pushed the market to record highs. The run-up has started to falter in recent weeks on concerns that the global economy is slowing.
The Dow Jones industrial average rose 125 points to 14,826 as of 3:36 p.m. Eastern Daylight Time, an increase of 0.9 percent. The Standard & Poor’s 500 index climbed 15 points, or 1 percent, to 1,598.
The Labor Department reported that applications for unemployment benefits fell last week to the lowest since January 2008. The decline suggests layoffs are easing. It’s a positive sign ahead of the government’s closely watched monthly employment report on Friday. Stocks fell April 5 after the government reported that hiring in March was the weakest in nine months.
"Everyone is looking to the April jobs numbers," said Tyler Vernon, chief investment officer at Biltmore Capital. "People are more confident that it was an anomaly last month and are looking for some bigger numbers."
Economists forecast that the economy added 160,000 jobs last month. That’s much better than the 88,000 added in March, but below last year’s pace of nearly 185,000 per month.
The outlook for global growth also got a boost after the European Central bank cuts its benchmark interest rate a quarter of a percentage point to 0.5 percent.
The euro fell a penny against the dollar to $1.3060. The price of gold rose $20.10, or 1.4 percent, to $1,466.30 an ounce. The price of crude oil rose $2.96 to $93.31 a barrel.
Investors were also watching earnings on Thursday.
General Motors rose $1, or 3.3 percent, to $31.19 after it lost less money in Europe and beat Wall Street’s expectations for first-quarter profit. The automaker’s earnings of 67 cents a share beat the 54 cents predicted by Wall Street analysts who follow the company.
Broadcaster CBS reported a 22 percent jump in first-quarter earnings as big events like the Super Bowl pushed advertising revenue higher. Its stock rose $1.13, or 2.4 percent, to $47.52.
Facebook jumped $1.55, or 5.6 percent, to $28.98 after its first-quarter revenue rose 38 percent, surpassing Wall Street expectations. Nearly a third of the company’s advertising revenue came from mobile devices, a greater share than analysts had expected.
The social networking site bucked the trend for companies reporting in the first quarter. Most corporations are exceeding analysts’ expectations on earnings, but falling short on revenue.
"If we continue to see several more quarters like this, investors would start to get nervous," said Andrew Milligan, head of global strategy at Standard Life Investments. He says that growth needs to pick up in the major export markets, like China and Europe, for U.S.companies to maintain earnings growth.
Earnings at companies in the S&P 500 are at record levels. They are forecast to increase by 4.4 percent in the first quarter, and keep rising throughout the year, according to S&P Capital IQ data.
Information technology stocks rose the most of the 10 industry groups in the Standard & Poor’s 500 index, up 1.5 percent. The industry group has surged in the past two weeks, after lagging the S&P 500 in the first three months of the year. Its 5.8 percent increase in 2013 still trails the 18.6 percent gain for health care companies, the best performing industry in the index.
Seagate Technology, a maker of hard drives, jumped $2.86, or 7.7 percent, to $39.82, even after the company reported a slump in sales and earnings. The decline wasn’t as bad as analysts had expected, and Seagate handily beat estimates for both sales and revenue.
Gains for technology companies helped push the technology-heavy Nasdaq composite higher. The index advanced 43 points, or 1.3 percent, to 3,343.
Stocks are rebounding after a slump Wednesday, when reports of slower manufacturing growth and hiring dragged down markets. The Dow fell 138 points, its worst drop in two weeks.
The market was down even after the Federal Reserve Bank reaffirmed its plan to continue its stimulus program, which is now five years old.
The Dow is 13 percent higher for the year and the S&P 500 has risen 12 percent.
The gains suggest that the market is getting ahead of itself, given a lackluster outlook for the economy, said Uri Landesman of Platinum Partners. He thinks the stock market is set for a pullback.
In government bond trading, the yield on the 10-year note was unchanged at 1.63 percent matching its low for the year.
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