A trader works at the New York Stock Exchange (NYSE) in New York. Photographer: Scott Eells/Bloomberg
Nov. 10 (Bloomberg) -- Brian Belski, chief investment strategist at Oppenheimer & Co., talks about the outlook for the equity market and investment strategy. He speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Nov. 10 (Bloomberg) -- The number of Americans filing applications for unemployment benefits fell to the lowest level in seven months, a sign the recovery may be encouraging companies to limit cuts in headcount. Jobless claims fell by 10,000 to 390,000 in the week ended Nov. 5, Labor Department figures showed today in Washington. Betty Liu reports on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
U.S. stocks advanced, following the biggest decline in the Standard & Poor’s 500 Index since August, as jobless claims dropped to the lowest level in seven months and concern about Europe’s debt crisis eased.
Equities rallied as S&P said it did not cut France’s debt rating, Greece named a new premier and Italian bond yields fell. Cisco Systems Inc. (CSCO), the largest maker of networking equipment, climbed 7.2 percent as profit and sales beat estimates. Merck & Co. jumped 3.3 percent after raising its dividend. Apple Inc. (AAPL) slumped 2.5 percent amid concern that the company may ship fewer units of its iPad tablet this year due to supply constraints.
The S&P 500 added 0.6 percent to 1,236.69 as of 12:50 p.m. New York time. The benchmark gauge for American equities lost 3.7 percent yesterday as one out of 500 stocks in the index gained, the fewest since June 2010. The Dow Jones Industrial Average advanced 97.03 points, or 0.8 percent, to 11,877.97.
“The economic data will come back into focus as we shift our vision away from the political fear in the euro zone,” Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas, said in a telephone interview. His firm oversees $715 billion. “As we remove uncertainties, the market starts focusing less on the risk scenarios,” he said. “In the U.S., a decline in claims is very positive.”
Equities tumbled yesterday on concern that European leaders may be unable to keep the euro zone intact as Italian yields surged to a record. The decline erased the month-to-date advance in the S&P 500. The measure had the biggest monthly gain in 20 years in October on speculation Europe would contain its crisis.
Erroneous Message
Stocks rebounded after S&P said a message was erroneously sent out today to some of its subscribers suggesting France’s top-notch credit rating had been lowered. It affirmed France’s AAA rating. Italian government bonds rose as the European Central Bank was said to purchase the securities and after the nation sold the maximum amount of one-year bills on offer at an auction. In Greece, Lucas Papademos, the former vice president of the ECB, was named to lead a unity government.
“I’m not willing to step up and proclaim all clear, but we’re moving in the right direction,” Don Wordell, a fund manager for Atlanta-based RidgeWorth Capital Management, which oversees about $47 billion, said in a telephone interview. “The most positive news of the day, though, was the jobless claims data showing that the U.S. economy is slowly getting better.”
In the U.S., a report showed the number of Americans filing applications for unemployment benefits fell to the lowest level in seven months, a sign the recovery may be encouraging companies to limit cuts in headcount. The U.S. trade deficit unexpectedly narrowed in September to the lowest level this year as exports surged to a record high, another report showed.
Won’t Derail
Speculation that Europe’s debt crisis would not derail the U.S. economic recovery sent the Morgan Stanley Cyclical Index up 1.3 percent today. The measure tumbled 4.6 percent yesterday. The Dow Jones Transportation Average gained 1.6 percent even as a gauge of airlines sank amid higher oil prices.
Cisco added 7.2 percent to $18.87. Chief Executive Officer John Chambers is eliminating jobs, scaling back operating expenses and revamping a management structure that slowed decision making. The company also is refocusing on its main products: switches and routers, which ferry data across networks. The moves are aimed at shoring up gross margin, a yardstick of profitability that narrowed to 61.4 percent in fiscal 2011 from 65.8 percent five years ago.
Merck gained 3.3 percent to $34.90. The second-biggest U.S. drugmaker raised its dividend for the first time since 2004 and emphasized drug discovery in a meeting with analysts today.
Apple Slumps
Apple lost 2.5 percent to $385.28. Analysts at Cleveland Research Co. reduced their predictions for shipments of the iPad to 12 million from 14 million in the quarter ending in December, saying “visibility from supply chain has softened” in recent weeks.
The rally that drove the S&P 500 up 20 percent since October fizzled after it failed to remain above its 200-day average for a second time. Yesterday, the index slid below its average in the past 200 days. The measure closed above the 200- day level on two straight days at the end of October, following the biggest monthly rally since 1991, and again on Nov. 8.
Equities surged worldwide starting in the first week of October on optimism European leaders would solve the crisis, driving the S&P 500 out of a price range where it had been stuck since the start of August. Price indicators such as the stock index’s average price are captivating investors, said Brian Barish of Cambiar Investors LLC.
“The S&P 500 failed to break the 200-day and Italy’s debt yields really blew out, so you have a panicky reaction in the marketplace,” Barish, who helps oversee about $8 billion as Denver-based president of Cambiar, said in a telephone interview yesterday. In early October, “the market was poised to rally on almost anything, and it did,” he said. The 200-day average is “where it ran out of gas.”
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