Friday, September 10, 2010

Wall St buoyed by upbeat economic data

NEW YORK: U.S. stocks rose on Thursday, Sept 9 as stronger-than-expected jobs and trade data helped lift optimism about the economic recovery, although sentiment was fragile as investors fretted over European banks.

Financials, hit hard in the August downturn, were among top gainers as new U.S. claims for unemployment benefits fell to a two-month low, while the trade deficit narrowed sharply in July. JP Morgan Chase Co rose 2.5 percent to $40.10.

"The recovery is not falling apart and continued growth is the most likely outcome," said Zach Pandl, economist at Nomura Securities International in New York. "This is generally a bond negative and positive for stock prices."

However, defensive sectors such as healthcare, utilities and telecommunications services were also among top gainers in a sign investors remain cautious. The S P healthcare index rose 1.2 percent, with Pfizer Inc up 1.3 percent to $16.77.

Volume was light and trading volatile as some traders were off for the Jewish new year holiday in an already slow week shortened by Monday's Labor Day holiday.

The Dow Jones industrial average gained 28.23 points, or 0.27 percent, to 10,415.24. The Standard Poor's 500 Index rose 5.31 points, or 0.48 percent, to 1,104.18. The Nasdaq Composite Index added 7.33 points, or 0.33 percent, to 2,236.20.

Earlier, the S P 500 touched a one-month high above 1,110 after data showed new claims for unemployment insurance fell to their lowest level in two months last week, while the U.S. trade deficit narrowed sharply in July.

But some expressed skepticism over the data as a Labor Department official said some states had been unable to submit claims in time because of the Labor Day holiday, resulting in the department's making estimates for them.

Deutsche Bank shares came under pressure because it is considering a capital increase of up to 9 billion euros ($11.43 billion) to bolster its balance sheet as Basel capital requirements are finalized, two people familiar with the matter said.

The sources said the capital increase would also allow Deutsche Bank to raise its stake in Deutsche Postbank, in which it already owns a stake of just under 30 percent. Deutsche Bank declined to comment.

Its shares fell 3.2 percent to $59.99 in New York.

"The Street seems to be confused about whether it's due to sovereign exposure or their take out of Postbank," said David Lutz, managing director of trading, Stifel Nicolaus Capital Markets in Baltimore.

But helping shares in the U.S. financial sector, veteran banking analyst Richard Bove said at least 17 U.S. banks with more than $10 billion in assets could emerge as possible takeover targets. They included Zions Bancorp, up 2.6 percent to $20.31, and Capital One Financial up 0.8 percent to $39.40.

The S P 500 has risen for six of the last seven sessions. Technical analysts continue to point to a bullish inverse "head and shoulder" formation in the index with a "neck line" at 1,130 that could signal a potential break out to around 1,250.

"The frustrating sideways action in the S P 500 and many developed markets belies a burgeoning build-up of bullish demand, which holds the potential to power prices significantly higher over the final stanza of 2010 and well into 2011," wrote Auerbach Grayson analyst Richard Ross in a research note.

Adobe Systems jumped 12.1 percent to $32.86 after Apple Inc said it is easing restrictions for building iPhone and iPad applications, a move that should allow for the use of third-party tools such as Adobe's Flash software.

The Dow's gains were limited by McDonald's Corp, which dropped 2.3 percent to $74.37 after its August sales in Europe were softer than expected.

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