As we approach the midday hour on the East Coast, all of the major U.S. stock indexes are firmly in positive territory, boosted by encouraging news on the job market. The Dow Jones Industrial Average, which is currently up about 75 points, is close to retracing all of the ground lost following Tuesday’s triple digit decline. The biggest gain thus far today amongst the major indexes has been turned in by the S&P 500 composite.
The tone of the economic news today was relatively positive, as the Labor Department reported that first-time claims for unemployment insurance fell to 451,000 last week; the consensus was 470,000. While the news was better-than-expected, the reading was still well above the 400,000 level that most economists would say is an indicator of strong economic growth. Given the string of dour economic reports this summer, the latest reading appeared to boost the confidence of investors that would right now embrace any signs that the economy is still growing, even if it is at a rather measured pace. Worries that the economy might be falling back into a recession (a view that we don’t share right now) drove stocks markedly lower during the month of August. So far, September, which has historically been a difficult month for equities, has been very kind to the bulls.
The increased appetite for risk in the investment community has shifted the focus from debt instruments to equities, with bond prices falling this morning. The yield on the 10-year Treasury note, which moves in the opposite direction to the price, is up more than five basis points, currently above the 2.70% mark. The yield on the benchmark security helps set the rates for home and other consumer loans.
On the corporate front the news remains very quiet, save a few reports. Of note, shares of Adobe Systems (ADBE) rose after computer giant Apple (AAPL) announced that it would amend its developer rules to let IOS coders use whatever tools they please, rather than just Apple’s tools. While Apple didn’t specifically reference Adobe Systems, investors believe that the new rules may help Adobe’s Flash and related tools become a viable development tool for IOS, whether or not Apple’s own products ever run Flash itself. Another noteworthy advancer today is Men's Wearhouse (MW). Shares of the clothing chain rose after it reported better-than-expected second-quarter results and it issued a third-quarter outlook above expectations.
Trading on the commodities markets for the most part has been positive today, with energy, agricultural, and livestock futures rising. The upbeat jobless data, along with weakness in the dollar, which makes commodities more attractive overseas, have been the catalysts. Data released today showing that oil supplies are tightening has lifted the price of crude oil.
Looking ahead to the afternoon hours, the bulls are making a strong case to remain in the driver’s seat. With little additional economic news due out this week, we expect trading to remain rather light. So far today, advancers have far outpaced decliners on both the New York Stock Exchange and the NASDAQ, where volume has been extremely low, with many traders off in observance of Rosh Hashanah.
