U.S. stocks closed mixed as most of world takes May Day off

On a day when most of the world’s markets were closed for the May Day holiday, U.S. stocks finished narrowly mixed on Thursday.

NASDAQ, after having been up as much as 0.9% at its high point of the day, closed with a 0.3% gain. The two major blue-chip indexes finished slightly lower, the Dow losing 0.1% and the S&P 500 ending with a marginal loss. The S&P’s 10 sectors were evenly split between gainers and losers, but only seven of the 30 Dow components ended higher. Internet (+1.5%) and biotech (+1.1%) stocks were among the best gainers on NASDAQ. The two worst performers among the NASDAQ 100 were two computer storage stocks, Western Digital (-6.6%) and Seagate (-3.5%), both of which released disappointing earnings reports. Most major international markets were closed Thursday, except for the U.K., where the FTSE 100 gained 0.4%, and Japan, where the Nikkei 225 rose 1.3%, its biggest gain in two weeks.

Thursday was a busy day for reports on the U.S. economy, and most of them were better than expected.

  • Personal consumption spending jumped 0.9% in March, the largest gain since August 2009. That was nearly double February’s upwardly revised 0.5% increase and well ahead of the 0.6% Street forecast. It also outpaced the rise in personal
    incomes, which rose 0.5%, slightly ahead of the 0.4% forecast and a similar increase the previous month. As a result, the personal savings rate fell to 3.8% in March, down from 4.2% in February and its lowest level since 3.6% in January 2013. For the past 12 months, consumer spending is up 4% while incomes are up 3.4%.
  • The ISM manufacturing index for April rose 1.2 points to 54.9, beating the Street forecast of 54.3. The employment index jumped 3.6 points to 54.7 while new orders held steady at 55.1. The index for the services sector gets reported next Monday.
  • Construction spending improved in March, rising 0.2%, reversing February’s downwardly revised 0.2% decline, which was originally reported as a 0.1% increase. However, the reading came in below the consensus forecast, which was looking for a 0.6% rise. The increase was fueled by a 0.8% increase in residential spending, which was largely due to a 4.4% jump in multifamily projects; single-family spending rose 0.2% after falling 0.3% the prior month.
  • The one report that came in much worse than expected was unemployment claims, which jumped for the second straight week. New claims for jobless benefits rose 14,000 to 344,000, a nine-week high, after climbing the previous week by 25,000 to an upwardly revised 330,000, which was the biggest increase since December. The latest increase was well above Street estimates, which was actually looking for a decline to 320,000 claims. Some pundits are blaming the recent two-week rise on Easter.

Prices of U.S. Treasury bonds were higher Thursday. The 10-year note gained a little more than ¼ point, its yield falling three basis points to 2.61%, its lowest closing level in nearly two months. During the day, however, the yield dropped below 2.60% for the first time since early February.

Reports/dates/facts/links worth paying attention to over the next week:

  1. May 2: U.S. non-farm employment and unemployment for April.
  2. May 5: ISM non-manufacturing survey for April.
  3. May 6: U.S. trade balance for March.
  4. May 7: U.S. productivity and unit labor costs for Q1 2014; MBA home purchase applications and mortgage refi’s (latest week); U.S. consumer credit for March.

Copyright © 2014 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

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