After a struggle, Dow gains 28

Better-than-expected reports on jobless claims and the trade deficit set off an early rally. Profit-taking and worries about European banks trim gains. McDonald's August sales don't excite.

By Charley Blaine Sep 9, 2010 1:28PM
Charley BlaineUpdated: 8:40 p.m. ET

Stocks were higher this afternoon for the second day in a row after government reports showed initial jobless claims fell more than expected and the U.S. trade deficit unexpectedly narrowed in July.

The jobless-claims report in particular supported the view that the economic recovery has slowed but hasn't collapsed, although skeptics thought the data may be overstating the improvement.
The gains nearly vanished in the midafternoon. But the Dow Jones industrials ($INDU) closed up 28 points to 10,415, after rising 74 points right after the open. The Standard & Poor's 500 Index ($INX) added 5 points to 1,104, and the Nasdaq Composite Index ($COMPX) was up 7 points to 2,236.

The Dow and S&P 500 have risen in five of the last six sessions.

Among stocks making big moves:
  • Adobe Systems (ADBE) jumped 12.1% to $32.86, tops among S&P 500 stocks, after Apple (AAPL) said it will relax restrictions on the development tools that programmers use to create mobile applications.
  • McDonald's (MCD) was off 2.3% to $74.37. Same-store sales in August were up 4.9%. Analysts had expected 5% growth.
  • Men’s Wearhouse (MW) gained 6% to $22.25 after the men's clothier's fiscal-second-quarter earnings beat analyst estimates.
  • Emmis Communications (EMMS) tumbled 25.6% to $1.22 after the company said CEO Jeffrey Smulya terminated an offer to buy the company for $2.40 a share.
  • United Airlines parent UAL (UAUA) was off 5.1% to $20.94. While total consolidated revenue passenger miles, a key measure, increased 2.5% in August, investors feared a slowing economy will hit business.
After the close, National Semiconductor (NSM) shares tumbled 5.4% to $12.20, after the company lowered guidance on its fiscal-second-quarter revenue.  The new estimate is $390 million to $415 million, down 5% to flat from a year ago. The Street was looking for $421 million. The stock had closed at $12.90, up 1 cent, in regular trading. First-quarter earnings of 36 cents beat Street estimates by 2 cents. Revenue of $431 million, up 31% from a year ago, beat the consensus estimate of $415 million.

Separately, the Association of American Railroads said weekly rail car volume set a new record in the latest week. Particularly strong has been growth intermodal traffic -- the transportation of truck containers from ports to inland markets.

The railroads' data have been consistently arguing against the idea that the U.S. economy is sliding back into a recession, as Anthony Mirhaydari noted in a post today.

Energy prices -- New York close
 

Thur.

Wed.

Month chg.

YTD chg.
Crude oil 

$74.25

$74.67

3.24%

-6.44%
(per barrel)











Heating oil

$2.0684

$2.0817

3.85%

-2.23%
(per gallon)











Natural gas 

$3.7680

$3.8140

-1.26%

-32.38%
(per mil. BTU)











Unleaded gasoline

$1.9078

$1.9148

4.20%

-5.72%
(per gallon)











Retail gasoline

$2.6830

$2.6800

0.22%

1.67%
(per gallon; AAA)












Resistance rears its head again
As welcome as another day of gains is, the market also showed it's not close to being exuberant.

Consider the S&P 500, which jumped to as high as 1,110 right after the open -- and promptly fell back.

That suggests traders are programming sell orders at 1,110 to take profits.

Also weighing on the markets: The dollar was moving higher against the British pound, the euro and the Japanese yen. A rising dollar has tended to depress commodity stocks and stocks of multinational companies.

Caterpillar (CAT) is our proxy on the point. The shares were up 1.5% right after the open but fell to finish off 0.1% to $70.64.

Crude oil, which hit $75.96 a barrel this morning, dropped down to $74.18 at 1:50 p.m. ET, down 49 cents. A decline in domestic supplies wasn't as big as expected.

Gold settled down $6.60 to $1,250.90 an ounce. Silver was down more than 15 cents to $19.86 an ounce.

Twenty-two of the 30 Dow stocks were higher. McDonald's decline subtracted 13 points from the blue-chip index by itself.

Meanwhile, 65 Nasdaq-100 ($NDX.X) stocks were higher, led by Adobe. The index was up 6 points to 1,886.

The 10-year Treasury yield rose to 2.761% from 2.654% after stocks continued to pull money from bonds.

With a day to go in a holiday-shortened week, the Dow is down 35 points. The S&P 500 is flat, and the Nasdaq is up 2 points.

Economy may not be as bad as thought
The Labor Department said initial jobless claims fell for a third straight week to 451,000 from 478,000. From the Aug. 14 peak of 504,000, initial claims are off about 10%.

Analysts had expected claims to fall to 470,000. Claims are off about 10% since hitting 504,000 the week of Aug. 14.

The market rally may have faded due to talk that the number may be lower than it should be because at least nine states didn't report numbers due to the Labor Day holiday.

The weekly number does tend to be revised higher in the next week.

Meanwhile, the trade gap shrank 14%, the most since February 2009, to $42.8 billion, the Commerce Department said today.

Overseas shipments increased 1.8% to $153.3 billion, the highest since August 2008, while purchases from abroad declined 2.1%. Economists had projected a deficit of $47 billion, according to a Bloomberg News survey.

The reports were good enough to cause Morgan Stanley economists David Greenlaw and Ted Wieseman to raise their third-quarter economic growth estimates to 2.4% from 2.1%, Bloomberg said.

"While the data haven’t exactly been robust, they've certainly been healthy enough to suggest that we're not on the cusp of a double dip (recession)," Stephen Stanley, the chief economist at Pierpont Securities in Stamford, Conn., told Bloomberg.

But a Blue Chip Economic Indicators report predicts U.S. gross domestic product will expand by 2.7% this year, 0.6 percentage point less than its June forecast. The panel of 50 economists cited lower consumer spending, business investment and construction.

A boost from bank stocks
Bank stocks were leading the market again. In fact, the group was has led the market for the last two weeks.

JPMorgan Chase (JPM) was up 2.5% to $40.10. Bank of America BAC) was up 1% to $13.50.

Financials were very strong at the open, but gains tailed off after news broke that Deutsche Bank (DB) may be considering a stock offering. That would dilute the stakes of existing shareholders. U.S. shares of the German banking giant were off 3.2% to $59.99.

The Deutsche Bank report came as European bank regulators have argued that many banks need to raise new capital to be able to absorb the blows from a major financial crisis.

Rochedale Securities analyst Dick Bove suggested 17 sizable banks that could be takeover targets.

Regional banks that could be takeover targets
Bank

State 
Webster Financial (WBS) 

Connecticut
Susquehanna Bancshares (SUSQ)

Pennsylvania 
Wilmington Trust (WL) 

Delaware 
Capital One Financial (COF) 

Virginia 
First Horizon National (FHN)

Tennessee 
Sun Trust Banks (STI) 

Georgia 
Regions Financial (RF) 

Alabama
Key Corp. (KEY)

Ohio
Fifth Third Bancorp (FITB) 

Ohio
MB Financial (MBFI) 

Illinois
Citizens Republic Bancorp. (CRBC) 
Michigan
Marshal & Isley (MI)

Wisconsin
Bancorp South (BXS)

Mississippi
Whitney Holding (WTNY)

Louisiana
International Bancshares (IBOC)

Texas
Zions Bancorp (ZION)

Utah
Cathay General Bancorp) 

California 
Source: Richard Bove, Rochedale Securities

Material from The Street.com was incorporated into this post.

Short hits from the markets -- New York close
 
  Thur.

Wed.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.135%

0.130%

0.00%

170.00%
5-year Treasury note 

1.566%

1.454%

16.69%

-41.70%
10-year Treasury note

2.761%

2.654%

11.47%

-28.16%
30-year Treasury bond

3.845%

3.723%

8.83%

-17.15%
Currencies







 

 
U.S. Dollar Index

82.69

82.580

-0.36%

5.71%
British pound

$1.5442

$1.5480

0.59%

-4.54%
(in U.S. $)











U.S. $ in pounds

£0.6476

£0.6460

-0.58%

4.76%
Euro in dollars

$1.2710

$1.2729

0.24%

-11.32%
(in U.S. $)











U.S. $ in euros

€ 0.7868

€ 0.7856

-0.24%

12.77%
U.S. $ in yen 

84.03

83.84

-0.08%

-9.64%
Canada dollar

$0.968

$0.965

3.16%

1.79%
(in U.S. $)











U.S. dollar 

$1.034

$1.036

-3.05%

-1.76%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,250.90

$1,257.50

0.05%

14.11%
(per troy ounce)











Copper

$3.4435

$3.5005

2.45%

2.90%
(per pound)











Silver

$19.8550

$20.0090

2.36%

17.87%
(per troy ounce)











Wheat 

$7.3800

$7.1100

13.10%

36.29%
(per bushel)











Corn

$4.7075

$4.6250

10.90%

13.57%
(per bushel)











Crude oil 

$74.25

$74.67

3.24%

-6.44%
(per barrel)










 

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