By Donna Kardos Yesalavich
Stocks mounted a modest afternoon rally to close near the day's
highs as investors awaited monthly jobs data on Friday that will
shed more light on the economic recovery.
The Dow Jones Industrial Average (DJI) finished up 50.33 points,
or 0.49%, at 10319.80. The Nasdaq Composite (RIXF) rose 1.06% to
finish at 2200.01 while the Standard & Poor's 500-stock index
(SPX) gained 0.91% to 1090.08.
Better-than-expected housing and retail data provided some
encouragement to investors, but caution prevailed following
Wednesday's big run-up.
If the government's jobs report falls short of already guarded
expectations, "that's going to reverse what happened" on Wednesday,
when stocks jumped 255 points, said John Canally, economist and
investment strategist at LPL Financial.
Canally said that while economic data has come in mixed
recently, "the preconditions for a double dip are not here." Strong
manufacturing data on Wednesday "puts the burden of proof back on
the double dippers," he said.
Retailers led Thursday's small climb after sales for the
back-to-school buying month of August largely came in better than
expected. Nordstrom (JWN) jumped 8%, Limited Brands (LTD) advanced
6% and J.C. Penney (JCP) rose 3.2%.
Homebuilders were also strong, as investors were heartened by an
unexpected increase in pending sales of used homes, a surprising
reversal after the index fell two months in a row following the
April 30 expiration of a tax credit for buyers. D. R. Horton (DHI)
rose 2.5%, PulteGroup (PHM) added 2.4% and Lennar (LEN) climbed
1.8%.
However, the retail-sales reports came on easy comparisons, and
Lawrence Yun, chief economist for the National Association of
Realtors, warned that the housing market's recovery would still be
a long one.
The Dow traded in a tight range of just over 50 points for most
of the day before breaking higher in the final hour of trading, led
by consumer discretionary and industrial stocks. More defensive
sectors, including utilities, telecommunications and health-care
stocks, were the three worst performers of the day.
Thursday's data had its disappointments. U.S. factory orders
rose less than expected in July, while the level of U.S. workers
filing new jobless claims last week suggested lingering troubles in
the job market, and second-quarter productivity fell more than
previously thought.
"We're sort of stuck in the mud," said Barry Knapp, managing
director, equity research at Barclays Capital. While he noted that
the housing and retail sales data topped expectations, Knapp said,
"nothing in the data to me points to a change in trend. It points
to continued slow growth."
Meanwhile, the government's monthly employment report loomed.
Unemployment currently stands at 9.5%, and that figure Friday is
expected to creep up to 9.6% as U.S. employers drop another 110,000
people off the payrolls.
"The recovery is stumbling along at this point," said Edmund
Hyland, managing director and a global investment specialist for
JPMorgan Private Bank's southeastern region. "It's been carried by
strength in the corporate sector. What the market would like to see
is that it starts to translate to jobs because consumers still
account for a significant portion of GDP."
Volume was low, with just over 3.8 billion shares changing hands
in NYSE Composite trading. The 2010 daily average is about 5
billion shares, although the August average was just over 4 billion
shares.
The euro (CUR_EURUSD) edged up to $1.2822, from $1.2803 late
Wednesday, after the European Central Bank kept its benchmark
interest rate unchanged at a record low 1%, as expected. ECB
President Jean-Claude Trichet said the ECB would extend its tool
box of additional bank funding on a "full allotment" basis, citing
continued uncertainties in the economy.
Treasurys were mixed, with an increase in the two-year note
pushing its yield down to 0.50% while a decline in the 10-year note
lifted its yield up to 2.63%. Crude-oil futures edged up to about
$75 a barrel, while gold futures also advanced.
Among stocks in focus, Burger King Holdings (BKC) soared 25% to
$23.59 as the fast-food chain confirmed that 3G Capital has signed
a deal to buy the company for $24 a share.
Meanwhile, computer maker Dell (DELL) withdrew from the bidding
war for 3PAR (PAR), surrendering the storage maker to rival
Hewlett-Packard (HPQ) after the tech giant lifted its offer to $2.1
billion. 3Par, which makes storage products used in cloud
computing, accepted H-P's offer, valuing the company at $33 a
share. H-P gained 1.2%, while Dell rose 2% and 3PAR climbed 2.5% to
$32.86.