By Jonathan Cheng
U.S. stocks staged a late-session rally fueled by the consumer
staples and materials sectors to post a third straight day of gains
amid mixed data on jobs, retail sales and consumer lending.
The Dow Jones Industrial Average (DJI) finished up 121 points,
or 1.2%, to 10,139, rebounding after a bruising pre-July 4 week.
Since Tuesday, the Dow has gained 4.7%, putting the measure back
around where it was at the beginning of last week.
The S&P 500 Index (SPX) rose 10 points, or 0.9%, to finish
at 1,070. The Nasdaq Composite Index (RIXF) closed up 16 points, or
0.7%, to 2,175.
Investors were cheered by strong June retail sales amid good
weather and aggressive promotions. Abercrombie & Fitch (ANF)
jumped 7.8% after same-store sales rose 9%, beating analysts'
estimates of 5.5%. Limited Brands (LTD) gained 2.2% after its sales
rose 6%. Consumer staples strengthened as well with Costco
Wholesale (COST) gaining 2.6%, and Walgreen (WAG) rising 3.6%.
"Frugality's still out there," said Christian Hviid, chief
market strategist at Genworth Financial Asset Management, noting
that weakness in the jobs market is likely still cutting into
spending. "It's a needs-versus-wants spending environment we're
back into."
In another positive sign, the Labor Department said initial
claims for jobless benefits declined by 21,000 to 454,000 in the
week ended July 3, more than the 12,000 drop expected by
economists, though the previous week's level was revised upward, to
475,000 from 472,000.
But some analysts pointed out the numbers were misleading, since
many longer-term unemployed workers had fallen off the rolls.
"These are volatile one-week numbers," said Sal Arnuk, co-head
of equity trading at Chatham, N.J.-based brokerage Themis Trading
LLC. "We still have millions of Americans out of work...I just
don't see the real economy getting meaningfully better yet."
Arnuk attributed the strong trading days to computer-driven
stock trading. "This is a big vacation week, but the computers and
servers are still cranking them out," he said. "These are what are
really driving the numbers, in our opinion."
Credit Suisse analyst Ana Avramovic wrote in a note to clients
that, beginning last month, trading volumes by exchange traded
funds were increasingly bunching up in the final half-hour of
trading. With volatility on the rise, Avramovic said, "traders may
be trying to adjust positions prior to the close in order to reduce
the risk they hold overnight, and ETFs are a prime tool for quickly
adjusting exposures."
Thursday's finish seemed to follow that pattern to a tee, with
the Dow hovering around 10,065 before shooting up about 70
points.
The market rally survived a late-day release from the Federal
Reserve that showed consumer credit falling in May for the fourth
consecutive month. Consumer credit outstanding decreased at a
seasonally adjusted annual rate of 4.5%, down $9.1 billion to
$2.415 trillion, according to the report, far outstripping the $2.0
billion decline that economists had been expecting.
"There is simply no way to spin this data, nor the past few
months, as anything other than confirmation that the consumer has
not come roaring back," Dan Greenhaus, chief economic strategist
with Miller Tabak, wrote in a note to clients.
Treasurys declined as economic optimism strengthened, with the
10-year yield (UST10Y) pushing above 3% for the first time in nine
days to finish at 3.02%. Yields move inversely to prices. Crude-oil
futures edged up to settle at $75.44 a barrel.
In other markets, the euro failed to garner any new direction
from comments made by European Central Bank President Jean-Claude
Trichet. The ECB kept its benchmark interest rate unchanged, as did
the Bank of England at its monthly meeting. The euro was recently
trading at $1.2692, up from $1.2679 late Wednesday in New York.