Stocks Edge Higher as Job Market Improves
The engines driving the stock market were more tepid than turbocharged Thursday, but they were enough to help stocks rise for a fifth straight day.
The three major U.S. stock indexes all closed higher as good news on the job market and healthy earnings from name-brand companies like Royal Caribbean and Harley-Davidson encouraged investors.
The Standard & Poor's 500 has risen every day since Friday, a record not matched since early March.
The forces driving the gains, however, were tenuous, market watchers said. Hiring remains sluggish, even with the drop in unemployment claims last week. The S&P's five-day winning streak is hardly a blockbuster: on Wednesday it rose just .01 point. And while companies are turning in profits that are beating the estimates of financial analysts, many are missing revenue forecasts.
Some investors think the stock market's most recent gains have more to do with the belief that central banks around the world, including the Federal Reserve, will continue to keep interest rates low and buy bonds to encourage borrowing and spending.
"Some of the earnings were OK, but it's more just stimulus, stimulus, stimulus," said Scott Freeze, president of Street One Financial in Huntingdon Valley, Pa. "As long as the world wants to print (money) ... the fears of a global slowdown are going to be muted."
Joe Heider, principal at Rehmann Group outside Cleveland, thought stocks were up mostly because investors can't think of anywhere else to put their money, given record-low interest rates.
"You can leave it in cash and make nothing on it," Heider said. "You can put it in bonds and earn nothing."
Heider said he thought the latest report on jobless claims was consistent with a "plodding" recovery: "Not booming, not exciting, but we just keep marching forward." Weekly applications for unemployment benefits fell 16,000 to 339,000, the second-lowest level in more than five years, according to the Labor Department.
The good news for the job market comes after a series of setbacks. In March, employers added only 88,000 jobs, down from an average of 220,000 for the previous four months. The unemployment rate fell to 7.6 percent from 7.7 percent, but only because more people stopped looking for jobs.
The Dow Jones industrial average rose as much as 91 points before giving up most of that gain. Investors were underwhelmed by what ultimately turned out to be a mixed bag on earnings. The Dow closed up 24.50 points, or 0.2 percent, to 14,700.80.
The S&P 500 rose 6.37 points, or 0.4 percent, to 1,585.16. Nine of the S&P's 10 industry groups rose, led by telecommunications. Verizon Communications, the biggest component in S&P's telecommunications group, rose 3 percent to $53.30 following reports that the company could offer $100 billion to buy out Vodafone's interest in their joint venture, Verizon Wireless.
The Nasdaq composite index rose 20.33, or 0.6 percent, to 3,289.99.
Small-company stocks rose more than the overall market, as they have all week. That's a signal investors are more willing to buy higher-risk investments. The Russell 2000 index rose 0.7 percent to 940.28. For the week, it's up 3 percent, more than the 1.9 percent gain in the S&P 500 index and the 1.1 percent increase in the Dow.
Thursday's earnings offered a mixed view of the economy, and mixed reactions from investors. Many companies have been reporting better first-quarter results, though the gains have come more from cost-cutting than from a strong economy.
So far, 71 percent of S&P 500 companies have beaten analysts' profit expectations for the first quarter, according to John Butters, senior earnings analyst at FactSet. But only 44 percent have beaten estimates for revenue.
Dow Chemical, which reported results Thursday, was one example. The company managed to increase profit even as revenue slipped because it cut costs and paid down debt. The stock rose nearly 6 percent to $33.97.
Safeway, a major grocery store chain, reported higher profit with the help of tax benefits. Revenue fell and missed analysts' expectations. Safeway's stock plunged almost 14 percent to $24.32. Investors were concerned about competition from dollar stores and big-box retailers.
In a report to clients, ConvergEx Group chief market strategist Nicholas Colas noted companies' higher earnings but said they don't match the "real feel" of an economy still crimped by "lackluster jobs growth, a flattening rate of improvement in the housing market, and incremental government austerity measures."
"If U.S. companies have proven anything in the last four years of subpar macroeconomic results," Colas wrote, "it is that they can make gallons of lemonade from just a few shriveled bits of citrus."