Stocks Post Substantial Gains Following Upbeat Jobs Data - U.S. Commentary

Thu. November 05, 2009; Posted: 04:38 PM

(RTTNews) - Stocks saw a significant rally on Thursday, as trader sentiment picked up this morning following some upbeat figures on the labor market and quarterly productivity. The major averages all posted standout gains after ending each of the two previous sessions mixed, with the Dow climbing back above the 10,000 level.

Before the start of trading, the Labor Department released its report on initial jobless claims for the week ended October 31st, showing that first-time claims for unemployment benefits fell by more than economists had been anticipating.

Jobless claims fell to 512,000 from the previous week's revised figure of 532,000. Economists had been expecting jobless claims to edge down to 522,000 from the 530,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims fell to their lowest level since claims came in at 488,000 in early January, the last time claims were below 500,000.

A separate report from the Labor Department showed that labor productivity increased by much more than expected in the third quarter, with the report also showing a bigger than expected decrease in labor costs.

On the earnings front, Cisco Systems (CSCO | Quote | Chart | News | PowerRating) reported first quarter adjusted net income of $0.36 per share compared to $0.42 per share a year ago, while sales for the quarter fell 12.7 percent to $9.0 billion. Analysts expected the company to earn $0.31 per share on sales of $8.74 billion.

The major averages remained firmly positive going into the close, ending the session just off their best levels of the day. The Dow closed up by 203.82 points or 2.1 percent at 10,005.96, the Nasdaq gained 49.80 points or 2.4 percent to end at 2,105.32 and the S&P 500 advanced by 20.13 points or 1.9 percent to 1,066.63.

Sector News

Steel and electronic storage stocks moved considerably higher on the day, with the NYSE Arca Steel Index and the NYSE Arca Disk Drive Index rising by 3.6 percent and 3.2 percent, respectively. With the gains, the indices continued to recover from their October losses.

Health insurance stocks also posted notable gains, boosting the Morgan Stanley Healthcare Payor Index up by 2.6 percent. The gain pushed the index to its best closing level in roughly six weeks.

Molina Healthcare Inc. (MOH | Quote | Chart | News | PowerRating) turned in one of the sector's strongest performances, advancing by 6.1 percent on the day. The stock ended the session at its best price in three months.

Telecommunication, defense, banking, biotechnology and housing stocks also posted substantial gains. Nearly all of the other major sectors also moved to the upside over the course of the trading, reflecting the broad based buying interest.

Dow Components

American Express (AXP | Quote | Chart | News | PowerRating) was the Dow's best performers on a day that saw all thirty blue chip stocks move higher. Shares of the credit card giant saw a gain of 5 percent, finishing the day at its best price in over one year's time.

Among the gainers, Procter & Gamble (PG | Quote | Chart | News | PowerRating) closed at a notable benchmark, although it saw a more modest gain, climbing by 2.4 percent. The upward move lifted the stock to its best closing price in ten months.

Dow component Cisco also rose after the firm reported first quarter results that came in above analyst estimates. The stock closed up 2.8 percent but was unable to break out of its recent range.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed mostly lower on Thursday. Japan's benchmark Nikkei 225 Index fell by 1.3 percent, while Hong Kong's Hang Seng Index fell 0.6 percent.

Meanwhile, the major European markets closed moderately higher on the day. The French CAC 40 Index rose by 1.1 percent, while the German DAX Index and the U.K.'s FTSE 100 advanced 0.7 percent and 0.4 percent, respectively.

In the bond markets, treasuries drifted higher over the course of the trading day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, closed at 3.533 percent, posting a loss of 1.3 basis points on the day.

Looking Ahead

Friday, all eyes will be on monthly jobs data from the Labor Department detailing the employment situation for the month of October.

Economists expect payrolls to decline by 175,000 compared to September's decline of 263,000, while the unemployment rate is forecast to edge up to 9.9 percent from the 9.8 percent reported in the precious month. The report will be made public at 8:30 a.m. ET.

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