Fewer jobless claims, better sales lift stocks
NEW YORK » Wall Street rose yesterday as investors bought back into stocks after two days of losses, encouraged by a drop in unemployment claims and a better-than-expected sales performance by discount retailers.
Although last week the Labor Department said the four-week average of initial unemployment claims rose to a two-and-a-half-year high, investors were pleased to hear that claims last week fell by more than expected, following a surge the previous week.
And while many retailers - from Gap Inc. to Saks Inc. - said yesterday that March sales slid as consumers grew more frugal, Wall Street was encouraged that other companies are weathering the economic weakness. Discount retailers Wal-Mart Stores Inc. and Costco Wholesale Corp., stores that sell staples like food and gasoline, reported sharp increases in March sales and indicated they expect sales to keep rising.
"The jobless claims snapped back down following the sharp rise last week. Combined with the news from Wal-Mart, it suggests that the consumer may be able to muddle through. That's providing some support for an otherwise strained market," said Alan Gayle, senior investment strategist for RidgeWorth Capital Management.
Questions about the health of the global financial system ahead of next week's bank earnings, however, continue to provide a troubling backdrop for the market. Lehman Brothers Holdings Inc. disclosed in a regulatory filing Wednesday that it liquidated three funds because of the tight credit markets and brought the assets of those funds, valued at $1 billion, onto its books Feb. 29. The investment bank said it also purchased deteriorated assets valued at $800,000 from other distressed funds.
The Dow Jones industrial average rose 54.72, or 0.44 percent, to 12,581.98.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 6.06, or 0.45 percent, to 1,360.55, and the Nasdaq composite index rose 29.58, or 1.27 percent, to 2,351.70. The Russell 2000 index of smaller companies rose 9.04, or 1.29 percent, to 707.42.
Advancing issues outnumbered decliners by just under 2 to 1 on the New York Stock Exchange, where consolidated volume came to 3.60 billion shares, up from 3.43 billion on Wednesday.
Government bonds fell as stocks rose. The 10-year Treasury note's yield, which moves opposite its price, rose to 3.53 percent from 3.48 percent late Wednesday. The yield rose to 3.55 percent in after-hours trading.
The Nasdaq got a big boost after Japanese drug maker Takeda Pharmaceutical Co. announced an $8.8 billion, all-cash bid for U.S. biotechnology company Millennium Pharmaceuticals. Millennium soared $7.99, or 49 percent, to $24.34.
After surging to a record Wednesday, light sweet crude fell 76 cents to settle at $110.11 a barrel on the New York Mercantile Exchange.
The dollar regained ground after the Bank of England lowered its base lending rate by a quarter-point to 5 percent, the lowest level in 17 months, and the European Central Bank left its rates unchanged. Gold prices fell.
Wal-Mart rose 52 cents to $54.66 after reporting its sales figures, and Costco rose 49 cents to $66.52.
Lehman Brothers slipped 29 cents to $40.25 after the fund liquidations.