U.S. Market Snapshot: Stocks Rise as Economic Data Boosts Optimism
U.S. equities gained as data on private employment and growth in non-manufacturing activity signaled a recovering economy.
In addition to encouraging economic data, several firms reported strong earnings reports. News Corp. reported a net income of $875 million for the fourth-quarter to rebound from a loss of $203 million during the same period one year prior. Time Warner Inc. reported a second-quarter profit of $562 million up from $524 million in 2009.
BP Plc stock was down for the day reversing early gains. In a report released by the U.S. government, 74% of the oil leaked from the Deepwater Horizon spill has been or will soon be eliminated by bacteria. This is positive news for a firm attempting to restore its image after the PR disaster that originated with the spill.
The Dow Jones Industrial Average advanced 44.05 points or 0.41%. All sectors gained on the day except for telecommunications, which lost 0.34%. The index closed at 10,680.43.
The S&P 500 also rose on the day gaining 6.78 points or 0.61% to close at 1,127.24. Similar to the Dow, 9 out of 10 sectors were up, while telecommunications was down 0.07%.
In Canada, the S&P/TSX composite index climbed 0.53% or 62.45 points to close at 11,845.05. Excluding health care and technology, which lost 1.11% and 3.54% respectively, each of the sectors gained on the day.
The tech-heavy Nasdaq composite index was down 11.84 points, or 0.52%, to close at 2,283.52.
On the economic calendar, private employment in the U.S. rose for the sixth consecutive month, rising by 42,000 in July according to an ADP report published today. In June, employment was revised upward slightly to show a gain of 19,000. Today’s report noted, however, that “over those six months increases have averaged a modest 37,000, with no evidence of acceleration.” Goods-producing employment fell 21,000, with manufacturing jobs falling 6,000 the first decline in six months. On a positive note service sector employment rose 63,000. Employment in construction and financial services showed continued albeit moderating declines. Large businesses did not boost employment in July. On the other hand, employment at both medium-sized and small-sized businesses rose by 21,000. The ADP report is based on data from 360,000 businesses with around 22 million workers on their payrolls.
In addition, the ISM non-manufacturing index (NMI)—which covers almost 90% of the economy—signaled expansion for the seventh consecutive month in July, rising to 54.3 from 53.8 in June (readings above 50 signal expansion). The increase in the index indicates that July’s growth pace was faster than June’s. Thirteen of the 18 industries included in the survey reported expansion in July, down from 15 in June and 16 in May. The non-manufacturing sector contracted for 11 consecutive months through August 2009, then entered expansion territory in September. After a brief dip into contraction in late 2009, the index returned to growth in January 2010. Gains in the non-manufacturing sector have been consistently lower than gains in manufacturing activity, although the gap has narrowed in recent months.
Treasury prices fell with the yield on the benchmark 10-year Treasury note up to 2.95%, up from 2.9% from late Tuesday.
In commodity markets, light crude for September delivery settled US$0.06 lower at US$82.49 per barrel on the New York Mercantile Exchange.
In currency markets today, EUR/USD traded at 1.3158, up from 1.3233 late on Tuesday in New York; Cable was quoted at 1.5886, down from 1.59563. USD/JPY traded at 86.28, up from 85.86. USD/CHF was at 1.0533, up from 1.0390, while USD/CAD was quoted at 1.0184, up from 1.0237.
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