On Thursday, markets chose to take a pause from its three-day winning streak as an increase in initial claims for unemployment benefits dampened sentiment. Investors now anxiously await November jobs data scheduled for release today. The lull in market movement follows the near 500 point surge of the Dow on Wednesday, which was the blue-chip index’s best performance since 2009.
The Dow Jones Industrial Average (:DJIA) dropped 0.2% to settle the day at 12,020.03. The Standard & Poor 500 (S&P 500) also slipped 0.2% to end yesterday’s trading at 1,244.59. The Nasdaq Composite Index was the lone gainer, edging up 0.2% to finish the day at 2,626.20. The fear-gauge CBOE Volatility Index (:VIX) shed a few points to hover below 27.50. On the New York Stock Exchange, Amex and Nasdaq, consolidated volumes were 6.8 billion shares, lower than the current daily average of 7.97 billion shares traded per day. On the NYSE, for every three stocks that declined, two stocks posted an upward movement.
While 20 of the 30 Dow components finished in the red, the financial sector posted one of the heaviest falls among the S&P’s 10 industry groups. The heaviest decliners for the blue-chip index, apart from the financials included Alcoa, Inc. (NYSE:AA), Caterpillar Inc. (NYSE:CAT), Chevron Corporation (NYSE:CVX), Microsoft Corporation (NASDAQ:MSFT) and The Travelers Companies, Inc. (NYSE:TRV) and they were down 2.1%, 1.1%, 1.0%, 1.2% and 2.2%, respectively.
As for the financial sector, the Financial Select Sector SPDR (NYSEArca:XLF - News) was down 0.6%. Financial stocks like Citigroup, Inc. (NYSE:C), The Goldman Sachs Group, Inc. (NYSE:GS), Morgan Stanley (NYSE:MS), UBS AG (NYSE:UBS) and JPMorgan Chase & Co. (NYSE:JPM) declined 1.8%, 1.5%, 1.9%, 3.1% and 1.7%, respectively.
The day’s trade was dominated by jobs data from the U.S. Department of Labor, and after a few successive weeks of gains, unemployment benefits rose for the second consecutive week. According to the report, initial claims increased 6,000 from the previous week to a seasonally adjusted figure of 402,000, for the week ending November 26. Claims were not only significantly higher from the consensus estimates of a figure of 390, 000, but also moved above the key level of 400, 000.
While the disappointment due to the increase in initial claims contributed towards the benchmarks’ modest fall, investors now awaited the non-farm payroll report from the government on Friday. This is a crucial report as total non-farm payroll accounts for approximately 80% of the workers who produce the entire gross domestic product of the United States. However, the concern and anxiousness were partially offset by the other economic data that came in.
The Institute for Supply Management reported that manufacturing sector had expanded in November. In addition, economic activity expanded for the 30th consecutive month. The Institute for Supply Management Manufacturing Business Survey Committee said: “The PMI registered 52.7 percent, an increase of 1.9 percentage points from October's reading of 50.8 percent, indicating expansion in the manufacturing sector for the 28th consecutive month”. This reading also topped the estimates that projected a reading of 51.6.
The Construction spending report from the U.S. Census Bureau of the Department of Commerce noted “that construction spending during October 2011 was estimated at a seasonally adjusted annual rate of $798.5 billion, 0.8 percent (±1.6%)* above the revised September estimate of $792.1 billion”. This increase of 0.8% was considerably higher than analyst’s expectations of a 0.3% rise.
On the European front, French President Nicolas Sarkozy stated: “Let's face it, Europe can be swept by the crisis if it does not pull itself together, if it does not change". Meanwhile, European Central Bank president Mario Draghi said, in order to uphold the budget rules, Europe requires a "new fiscal compact". The domestic markets remained unaffected in the absence of significant developments in Europe. The markets also took a breather a day after it posted robust 4% upward movement, which was spurred by the coordinated action of central banks on Tuesday to ease the cost of borrowing in dollars.
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