Closing Wrap-Up, Nov. 5
November 5, 2009
Stocks enter rally mode Thursday on hopes of an improved jobs report. The Dow ($INDU) gained 203.82 points, or 2.08 percent, to a level of 10,005.96. The S&P 500 ($SPX) added 20.13 points, or 1.92 percent, to 1,066.63. The Nasdaq ($COMPQ) tacked on 49.80 points, or 2.42 percent, to 2,105.32. Volume was actually on the light side on the session with the NYSE trading 1.29 billion shares and the Naz turning over 2.23 billion shares. Market breadth was positive by a 25-to-5 and 22-to-6 margin on the Big Board and Naz respectively.
Gains were broad-based Thursday thanks to Cisco’s (CSCO) earnings report and some better than expected economic news. The Dow was able to move back above 10,000 and saw its largest point gain since July. The bulls might have been a bit worried heading into the last hour of trading given the declines seen Wednesday heading into the close of trading. Data on productivity in the third quarter and a decline in jobless claims helped the bulls hold onto their gains.
Productivity in the third quarter rose 9.5 percent, easily surpassing estimates for growth of 6.3 percent. This also followed a gain of 6.9 percent in the second quarter. Corporate America is getting all they can out of the current workforce and many economists feel hiring is the next step. Productivity just can’t continue at this pace indefinitely, so in order to keep up with demand, businesses will need to hire more workers.
Jobless claims for the week ending Oct. 31 fell by 20,000 to a level of 512,000. This puts the four-week moving average at 523,750, but at least the trend is to the downside. In fact, jobless claims are down about 20,000 from late September. This news provided some hope that nonfarm payrolls will show improvement. Economists are looking for payrolls to decline by 175,000 in October after falling by 263,000 in September.
The Retail HOLDRs (RTH) were slightly positive on the session, rising half a percent to $91.46. The retail sector got same-store sales results from many of the nation’s chain stores. Overall, 11 of the 24 companies reporting beat estimates, with 11 also seeing gains rather than declines in October. Consumer spending is very important as we head into the holiday shopping season. Of course, the degree of spending will largely depend on the improvements seen in the jobs market.
Shares of networking giant CSCO rose 2.75 percent today to a price of $23.93. The stock fell short of hitting a new 52-week high, but traders were pleased with the company’s earnings report. Cisco beat earnings estimates by 5-cents a share with revenues also topping expectations, despite falling 12.6 percent. Cisco’s board of directors also approved an additional $10 billion to Cisco’s stock buyback program.
Jody Osborne
Senior Writer & Options Strategist
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