Positive economic data keep losses under control
U.S. stocks dropped on Thursday, 05 December 2013 slapping both the S&P 500 and Dow Jones Industrial Average with their fifth straight down day, as better-than-expected readings on employment and economic growth boosted bets that a stimulus reduction could come this month. Like the previous four sessions, though, the losses were fairly modest in scope.
The Dow dropped 68.26 points, or 0.4%, to finish at 15,821.51. The Nasdaq Composite shed 4.84 points, or 0.1%, to 4,033.16. The S&P 500 slid 7.78 points, or 0.4%, to close at 1,785.03.
Apple, Boeing, 3M and Intel helped limit today's losses. Every sector in the S&P still finished in red with the exception of the industrials sector which was unchanged.
The tech-heavy index outperformed the other main indices on Thursday thanks in part to Apple which rose 0.5% gain on news that China Mobile has signed a deal to offer iPhones on its network.
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Thursday's batch of U.S. economic data once again favored the stronger-than-expected side. The gross domestic product report came in better than expected and weekly jobless claims dropped. The downbeat report was a decline in factory orders. Still, the good news on the U.S. economy has outweighed the bad news recently. Such suggests the U.S. central bank will move sooner to wind down (taper) its monthly bond-buying program, which is also called quantitative easing.
The headline print for each certainly aided such thinking. Initial claims for the week ending 30 November checked in at just 298,000 (consensus 330,000) while the second estimate for Q3 GDP jumped to 3.6% (consensus 3.0%) from 2.8%. That was the first sub-300,000 print for initial claims since early September and the 3.6% growth in Q3 GDP was the strongest since the second quarter of 2010.
The Department of Labor acknowledged that seasonal adjustment problems biased the claims number lower while the change in private inventories accounted for 1.68%age points of Q3 GDP growth. Take the change in inventories out of the equation and real final sales were up just 1.9% versus 2.0% in the first estimate. Furthermore, the 1.4% growth rate in personal consumption expenditures was the lowest rate since the fourth quarter of 2009.
The European Central Bank's monthly monetary policy meeting and the press conference by ECB president Mario Draghi were held on Thursday. The ECB meeting produced no change in interest rates. No big policy decisions were expected after last month's meeting, in which the ECB cut its main interest rate to a record low. However, Draghi's comments at his press conference were deemed less dovish than some expected and that rallied the Euro currency. Still, Draghi said EU monetary policy will remain very accommodative for quite some time to come.
Arguably the most important economic report of the week, and of the month, is Friday's U.S. Labor Department employment report for November. The key non-farm payrolls figure of that report is seen coming in at up around 185,000 jobs. Given Wednesday's strong ADP national employment report, in which the jobs figure was up 215,000, market is expecting a stronger Labor Department employment report on Friday.
Another laggard of note today was the US Dollar Index. It got clipped largely on account of the euro taking off after the ECB elected to keep its main lending rate unchanged and ECB President Draghi avoided any telltale hint at his press conference that further easing measures would be implemented in the very near future.
Bullion prices ended lower on Thursday, 05 December 2013. Gold futures settled more than 1% lower on Thursday, returning much of the gains they scored in the previous session as a stronger-than-expected U.S. economic recovery and fall in jobless claims dulled the metal's investment appeal. The dollar weakness did not benefit commodities much and it certainly didn't help gold prices.
February gold lost $15.30, or 1.2%, to settle at $1,231.90 an ounce on the Comex division of the New York Mercantile Exchange. March silver fell 26 cents, or 1.3%, to $19.57 an ounce.
Crude oil futures pared much of their gains by the close but still logged a fifth-straight session climb on Thursday, 05 December, 2013 at Nymex, supported by U.S. data showing third-quarter economic growth, a fall in weekly jobless claims and the first drop in crude supplies in 11 weeks.
Crude oil for January delivery rose 18 cents, or 0.2%, to settle at $97.38 a barrel on the New York Mercantile Exchange, pulling back from a session high just a penny below $98. A day earlier, the U.S. Energy Information Administration said U.S. domestic crude oil inventories dropped 5.6 million barrels in the week ended Nov. 29.
Indian ADRs ended mostly lower on Thursday. In the IT space, Infosys shed 0.92% at $53.87 and Wipro gained 0.61% at $11.59. In the banking space, ICICI Bank rose 0.76% at $36.90 and HDFC Bank was down 0.03% at $34.58. In the other sectors, Tata Motors slipped 1.83% at $31.57 and Dr Reddys Laboratories shed 1.3% at $39.38.
Friday's action is sure to be dictated by the details of the November employment report and the direction long-term interest rates take in its wake.
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