Markets & Finance

Stocks Finish Higher


Better than expected data on the service sector boosted indexes Thursday. Friday's watch list: The August jobs report

U.S. stocks closed higher Thursday, snapping a four-day losing streak with the help of better-than-expected August sales posted by a number of retailers and a rise in the August ISM nonmanufacturing index to 48.4 from 46.4 in July.

Another economic report released Thursday showed that weekly initial jobless claims fell 4,000, while continuing claims rose 92,000.

A 5% jump in the Shanghai composite index overnight on reassurances from Chinese authorities that they would do everything they could to support stocks helped lift sentiment on Wall Street.

On Thursday, the 30-stock Dow Jones industrial average finished higher by 63.94 points, or 0.69%, at 9,344.61. The broad Standard & Poor's 500-stock index was up 8.49 points, or 0.85%, at 1,003.24. The tech-heavy Nasdaq composite index gained 16.13 points, or 0.82%, to 1,983.20.

Treasuries fell. The dollar index rose. Gold futures rose, with the yellow metal nearing $1,000 per ounce. Oil fell.

Friday brings the eagerly awaited August employment report; Standard & Poor's economists see nonfarm payrolls falling 225,000 and the unemployment rate rising to 9.5% from 9.4%.

Among retailers posting monthly same-store sales gains: BJ's Wholesale (BJ), TJX (TJX), and Aeropostale (ARO). August sales for Costco (COST) were flat.

Same-store sales fell at Abercrombie & Fitch (ANF) and Gap (GPS).

In economic news Thursday, the U.S. ISM nonmanufacturing index rose to 48.4 in August from 46.4 in July as the pace of contraction in the service sector slowed. The index was at 50.4 a year ago (and last above 50 in September), and though the August index is still in contractionary territory, the level is significantly above the 37.4 record low hit in November 2008.

The business activity index rose to 51.3 from 46.1. Employment edged up to 43.5 from 41.5. New orders rose to 49.9 from 48.1. Export orders climbed to 54.0 from 47.5. Prices paid jumped to 63.1 from 41.3. The manufacturing and nonmanufacturing composite index increased to 48.9 from 46.7 in July.

Initial claims for unemployment insurance fell 4,000 in the week ending Aug. 29, to 570,000. The level was higher than the 560,000 market consensus. The number of people receiving benefits jumped 92,000 to 6,234,000 in the week ended Aug. 22, raising the insured unemployment rate 0.1 to 4.7%.

"The data are slightly disappointing, but claims are highly volatile at the end of the summer because of the approach of school and the Labor Day holiday," notes Standard & Poor's senior economist Beth Ann Bovino.

On Thursday, the European Central Bank held its benchmark refi rate at 1.00%, which was widely expected. The Swedish Riksbank held the repo rate at 0.25%, and acknowledged that signs over the turnaround have "become increasingly clear" but said that the rate would remain at the current low level "over the coming year".

Bloomberg News reported Treasury Secretary Timothy Geithner said the Group of 20 nations has been "very successful" in helping to end the global recession but cautioned that it's too early to remove policies aimed at boosting growth. "We've come a very long way but I think we have to be realistic, we've got a long way to go still," he told reporters in Washington. Geithner was headed for a meeting of Group of 20 finance ministers and central bankers Sept. 4-5 in London. The officials are laying the groundwork for a summit meeting later this month in Pittsburgh, where leaders will discuss measures to overhaul supervision of the financial system.

The OECD said the global recession is coming to an end faster than thought just a few months ago and may already be over.

Philadelphia Fed President Charles Plosser said in a CNBC interview that the U.S. economy has sustained a possibly permanent shock that could depress growth in the future, but said the Fed must engineer a careful exit from the unconventional policy programs it has undertaken to stimulate the economy, along with the possible need for higher interest rates, or open up the risk of higher inflation.

In company news Thursday, Oracle (ORCL) said the European Commission has decided to seek more information regarding the company's acquisition of Sun Microsystems (JAVA) by conducting a Phase Two inquiry.

Sepracor (SEPR) agreed to be acquired by Dainippon Sumitomo Pharma in a $2.6 billion deal. Dainippon Sumitomo will acquire Sepracor through a cash tender offer of $23 per share, followed by a merger to acquire all remaining outstanding Sepracor shares at the same price paid in the tender offer. Speculation on this acquisition made the rounds on Wednesday, notes S&P MarketScope.

Quanta Services (PWR) agreed to acquire privately held Price Gregory Services, Inc., a natural gas and oil transmission pipeline infrastructure service provider in North America, in a $350 million cash and stock deal. The deal is expected to be accretive to Quanta's earnings per share (EPS) before amortization expenses by $0.13-$0.21 in 2010.


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