Markets Bounce Off Lows on Upbeat ISM Report
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U.S. stocks trimmed their losses Thursday morning in response to the strongest manufacturing report since June and as the bulls attempt to tack onto Wednesday's monster 490-point surge.
Today’s Markets
As of 10:17 a.m. ET, the Dow Jones Industrial Average fell 3.29 points, or 0.03%, to 12041.01, the Standard & Poor's 500 Index gained 1.58 points, or 0.13%, to 1248.54 and the Nasdaq Composite jumped 10.72 point, or 0.41%, to 2631.04.
Wall Street started slightly lower after stocks soared over the prior three trading sessions, with the blue chips surging 814 points, or 7.8%. That represented the best three-day performance for the stock average in more than two years on a percent basis, and more than three years on a point basis. The buying binge has been highlighted by Wednesday’s Fed-fueled 490-point rally on the Dow -- the index’s best performance since March 2009.
Traders took a more cautious approach on Thursday.
“We’ve got a hangover from what we saw yesterday,” Will Hedden, a trader at London-based IG Index said in an interview with FOX Business. “People are being very cautious after the big move yesterday.”
Stocks hit session highs after the closely-watched Institute for Supply Management manufacturing index rose to 52.7 in November, up from 50.8 in October and beating estimates for 51.5. It also marked the highest reading since June 2011.
Separately, the Commerce Department said U.S. construction spending rose 0.8% in October, topping forecasts for a rise of 0.3%. It marked the third-straight monthly increase for this backwardly-looking report.
Both reports support a string of recent indicators showing the U.S. economy may be growing at a faster pace than some had feared.
On the other hand, the Labor Department said initial jobless claims rose by 6,000 last week and returned above the critical 400,000 level to 402,000. Economists had forecasted a decline to 390,000 claims. The government also upwardly revised the previous week’s claims levels.
This negative report comes on the heels of a considerably better-than-expected payroll survey from ADP that showed the private sector added 206,000 jobs in November. The all-important monthly employment report from the Labor Department is on tap for Friday.
Wednesday’s burst of buying came after the Federal Reserve, European Central Bank and four other major central banks launched a united effort to ease tight conditions in global money markets. The move involved extending lines to provide more dollar funding, at a cheaper price, to banks that need it, particularly in Europe.
Zach Pandl, an economist with Goldman Sachs, called the so-called currency swaps the “unsung hero” of the financial crisis in a note to clients, saying it played a “major role” in easing the market turmoil that began in 2007. However, Pandl also notes the maneuver “highlights the severity and reach of the European financial crisis.” Indeed, market participants were still closely eyeing European bond markets on Thursday.
On the European front, Spain saw strong demand at its roughly $5 billion bond auction, while France, Europe’s second-biggest economy, saw the yields on its 10-year notes moderate. Bond yields indicate how much it costs countries to borrow on the private market, and the higher the yields, the more difficult it comes to refinance debt. Therefore, moderating yields help ease pressure on euro zone countries.
However, reports from China showing its manufacturing sector contracted for the first time in three years provided a counterbalance to the positive news out of Europe.
European blue chips fell 0.35%, while the euro climbed 0.4% to $1.349, extending big gains from the prior session. The U.S. dollar fell 0.25% against a basket of six world currencies.
On the corporate front, auto makers revealed sales figures from November. General Motors (NYSE:GM) said its U.S. sales climbed 7% year-over-year, while Chrysler posted a 45% surge in sales.
Energy markets were modestly to the downside. The benchmark crude oil contract traded in New York rose 54 cents, or 0.55%, to $100.90 a barrel. This comes on the heels of a more than 7% gain in November. Wholesale RBOB gasoline gained 0.0236, or 0.92%, to $2.5817 a gallon.
Gold rose $4.80 a troy ounce, or 0.27%, to $1,754.90.
Traders continued moving out of U.S. government debt, seen as a safe haven asset, pushing yields higher. The benchmark 10-year note yielded 2.101% from 2.079%.
Foreign Markets
The English FTSE 100 rose 0.51% to 5,533.55 and the German DAX slid 0.47% to 6,060.26.
In Asia, the Japanese Nikkei 225 soared 1.93% to 8,597 and the Chinese Hang Seng spiked 5.6% to 19,002.