Stocks bounce back after Spain details budget plan
The country's 2013 budget concentrates on spending over revenue. US jobless claims decline more than expected. Second-quarter GDP is revised lower, while durable goods orders sink. Pending home sales decline.
Stocks bounced back Thursday after Spain detailed its 2013 budget plan and analysts found no cause for alarm. Markets opened higher after an upbeat U.S. jobless claims report and despite other economic data pointing to weak growth. Investors were also optimistic about the prospects of further stimulus measures in China.
The Dow Jones Industrial Average ($INDU) was up 83 points at 13,497. The S&P 500 ($INX) was up 14 points at 1,447. The Nasdaq Composite ($COMPX) was up 38 points at 3,132, led by Apple's (AAPL) bounce.
If the markets manage a positive session Thursday, it would snap a five-day losing streak for the S&P 500 Index, which fell again Wednesday as civil unrest over austerity in Europe sparked investor concern.
Spain's budget plan, revealed after 11 a.m. ET, would focus on cutting spending rather than hiking taxes. The government announced a detailed timetable for economic reforms and a tough 2013 budget in what many see as an effort to pre-empt the likely terms of any international bailout, Reuters reported.
Spain's budget minister added that he sees 2013 GDP down 0.5% but lighter job losses in 2013. Spain plans to tap about 3 billion euros from its reserves for liquidity.
Jobless claims fall sharply
The number of Americans who applied for unemployment benefits last week fell by 26,000 to a seasonally adjusted 359,000, the lowest level in two months. That was much better than economists' expectations for a drop to 379,000, according to Briefing.com.
The prior week's figure was revised up to show 3,000 more applications than previously reported.
The four-week average of new claims fell by 4,000 to 374,000, the Labor Department said, breaking five weeks of increases. The four-week average is often seen as a better indicator of labor market trends. While levels have remained in a narrow range in recent weeks, suggesting little change in the labor market, the current reading offers a positive sign.
GDP revised lower
Second-quarter economic growth was much lower than previously expected, as the Commerce Department cut its final GDP estimate to 1.3% from 1.7%. Economists had expected GDP growth to remain at 1.7%, according to Briefing.com.
While drought conditions cut into inventories, less consumer spending and business investment than previously estimated also affected economic growth.
Durable goods orders sink
Orders for durable goods sank 13.2% in August, the biggest one-month decline in 3 1/2 years, as bookings for autos and aircraft fell sharply, the Commerce Department reported. Economists had expected a decline of 5%, according to Briefing.com.
Excluding the volatile transportation sector, whose bookings can swing sharply from month to month, orders fell by a much smaller 1.6% but still much more than the expected 0.2% decline. Orders for July were revised down to a 3.3% increase from an initial report of a 4.1% gain.
Shipments of these goods, which are used to calculate gross domestic product, fell 0.9% after declining 1.1% in July, suggesting that third-quarter economic growth will probably not improve much from the second-quarter 1.3% annual pace.
Pending home sales decline
Pending home sales -- a signed contract that has yet to close -- fell in August after hitting a two-year high in the previous month. The pending-home-sales index fell to 99.2 from a upwardly revised 101.9 in July, the National Association of Realtors said. The reason for the drop, the group said, was a shortage of supply of lower priced homes.
Compared to the same period in 2011, pending home sales were up 10.7%, marking the 15th straight month of year-on-year gains.
Chinese stocks surge
In Asia, Chinese stocks soared to lead Asian markets, with analysts attributing the gains to bargain buying. China's Shanghai Composite ended 2.6% higher, while Hong Kong's Hang Seng Index gained 1.1%.
Data released Thursday showed the People's Bank of China had injected a net 365 billion yuan (about $58 billion) this week into the Chinese banking system. There was more speculation that the China Securities Regulatory Commission, the country's markets watchdog, will announce steps to support the markets.
Japan's Nikkei Stock Average and Australia's S&P/ASX 200 Index each gained 0.5%.
European markets rise
European stock markets rose ahead of Spain's announcements of its 2013 budget and economic reforms, which could help pave the way for a bailout request.
Greek leaders have reached a basic agreement on a 13.5 billion-euro ($17.4 billion) savings and revenue plan, The Wall Street Journal reported. Inspectors will now decide whether the plan is in compliance with international creditors and whether Greece deserves to receive another bailout installment next month, the second rescue package the country has received since its debt crisis began in late 2009. Greece will then get 31.5 billion euros.
On a slightly more positive note, the U.K. economy shrank less than previously thought in second quarter.
Stocks to watch
Tempur-Pedic International (TPX) has agreed to acquire mattress company Sealy (ZZ) in a deal valued at $229 million. Sealy shareholders will receive $2.20 a share, a premium of 2.8% to Wednesday's close. Including debt assumption, the deal is valued at about $1.3 billion.
Discover Financial Services (DFS) said that fiscal third-quarter profit slipped 3.4%, yet still managed to beat expectations. Delinquencies and charge-offs declined, and loans grew, MarketWatch reported.
Nike (NKE) is expected to report quarterly results, with analysts expecting a profit of $1.12 a share, down from $1.36 a share. Analysts expect sales rose to $6.43 billion from $6.08 billion, driven by U.S. demand.
Research In Motion (RIMM) will report results for its second fiscal quarter after the close. Analysts expect a net loss of 47 cents per share for the quarter, which would be the third straight period of losses for a company that earned 63 cents a share in the same period last year. Revenue is expected to slide 40% to $2.49 billion.
Goldman Sachs resumed its analyst research coverage of Yahoo (YHOO) with a "buy" rating and a 12-month price target of $22 a share. Hewlett-Packard (HPQ), meanwhile, was cut to "underperform" at Jefferies.
Thor Industries (THO) on Wednesday reported that its fiscal-fourth-quarter earnings rose 20% as its recreational vehicle business saw double-digit sales growth. Both earnings and revenue were better than expected.
An easy guide to keeping political news in perspective ...
1. The Wall Street Journal is read by the people who run the country.
2. The Washington Post is read by people who think they run the country.
3. The New York Times is read by people who think they should run the country, and who are very good at crossword puzzles.
4. USA Today is read by people who think they ought to run the country but don't really understand The New York Times. They do, however, like their statistics shown in pie charts.
5. The Los Angeles Times is read by people who wouldn't mind running the country, if they could find the time -- and if they didn't have to leave Southern California to do it.
6. The Boston Globe is read by people whose parents used to run the country and did a poor job of it, thank you very much.
7. The New York Daily News is read by people who aren't too sure who's running the country and don't really care as long as they can get a seat on the train.
8. The New York Post is read by people who don't care who is running the country as long as they do something really scandalous, preferably while intoxicated.
9. The Miami Herald is read by people who are running another country, but need the baseball scores.
10. The San Francisco Chronicle is read by people who aren't sure if there is a country or that anyone is running it; but if so, they oppose all that they stand for. There are occasional exceptions if the leaders are handicapped, minority, feminist, atheist dwarfs who also happen to be illegal aliens from any other country or galaxy, provided of course, that they are not Republicans.
11. The National Enquirer is read by people trapped in line at the grocery store.
12. The Seattle Times is read by people who have recently caught a fish and need something to wrap it in.
Jobless claims from last week were revised up!? Gotta be a once in lifetime thing right?
Hmmm like I have been saying with Bernanke printing an infinite amount of fake monies to keep the stock market going up in the the biggest asset bubble yet we are seeing bleed over into housing where 80 percent of houses are being brought by investors. And those investors are turning over the houses to each other and pushing the prices up the food chain with each roll over.
This situtation is not going to end well for either housing nor the stock market.
It's as if the central banks want to break up the western economies right now.
They could have pumped trillions of fake monies into manufacturing and turned the US economy around on a dime (what ever that means) and we would be having like 7 percent growth right now more than enough to solve the debt crisis and with tens of millions of Americans working solve the revenue income of the government at the same time.
Sometimes I think the Federal Reserve has forgotten that targeted money into certain industries is a good thing. Like pumping money into World Comm and letting it build a fiber optic cable system across America and the world which was too expensive and too much for that time period.
Of course World Comm went bankrupt but the real communication companies brought up the fiber optic cables for pennies on the ten dollars and got a real bargin.
I am sure that World Comm was set up to fail just to get the fiber optics built.
We need the same kind if thinking now just pump fake monies into manufacturing companies and forget about the cost of the manufacturing as those dollars are not important. It's getting twenty million Americans working again and paying taxes to balance the federal deficit that is important.
Gee either the people in charge are either stupid or communist agents bent on destroying the USA economy.
WAKE UP PEOPLE MONEY IS JUST SO TOTALLY USELESS.
We have CEO's making $250,000,000 a year and yet do nothing. We have Chinese labor producing $500,000 worth of goods and only being paid $500 a year for their work.
The monetary system is broken and nothing they are doing is fixing it and they are just making things worse by rewarding the very people who broke it to continue to break the economic system.
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Tighter regulations and the end of a lengthy bull market in bonds have changed the landscape forever.
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