Stock futures hold on to early gains even as government says unemployment claims rise

Stock futures hold on to gains after jobs data

NEW YORK — Stock futures pointed to a higher market open Thursday, as more signs of weakness in the labor market led investors to bet that the government will keep interest rates low.

The Labor Department said the number of newly laid-off workers seeking jobless benefits rose more than expected last week to 474,000 after falling for five straight weeks. Economists had been expecting initial claims of 460,000.

Claims have fallen steadily since this summer, but investors want to see signs that employers are hiring, not just laying off fewer workers.

The number of people continuing to claim benefits fell by 303,000 to 5.16 million, the lowest level since February. However, the so-called continuing claims do not include millions of people that have used up the regular 26 weeks of benefits typically provided by states, and are receiving extended benefits for up to 73 additional weeks.

The report was the latest evidence that the economic recovery will be bumpy, which means the Federal Reserve will likely keep interest rates low for some time. Low interest rates and the resulting decline in the dollar have encouraged investors to buy stocks and commodities this year.

Following the report, the dollar slumped against other major currencies. A weaker dollar makes commodities cheaper for foreign buyers and boosts profits at U.S. companies that do business overseas.

The weaker dollar drove exports to their highest level in nearly a year in October, the Commerce Department said Thursday. The surge in exports helped narrow the trade deficit to $32.9 billion from $35.7 billion in September. Economists had expected the deficit to increase.

Ahead of the market’s open, Dow Jones industrial average futures rose 52, or 0.5 percent, to 10,382. Standard & Poor’s 500 index futures rose 6.90, or 0.6 percent, to 1,102.50, while Nasdaq 100 index futures gained 5.50, or 0.3 percent, to 1,798.

High unemployment has been seen as one of the economy’s biggest obstacles to sustained growth. Last week, the Labor Department said employers cut just 11,000 jobs in November, far less than expected and the fewest monthly job losses since the recession began in late 2007.

That news stirred concerns that the Fed would raise interest rates sooner than expected, which would make the dollar look more attractive again. Since then, investors have been adding the dollar to their portfolio.

James Cox, managing partner at Harris Financial Group, said the concerns about an increase in interest rates was overdone.

“It is highly likely that policy will remain highly accommodative for the majority of 2010,” he said.

Stocks rose moderately on Wednesday, giving the Dow Jones industrial average a 51 point gain after a more than 100-point drop the day before. Analyst upgrades of a handful of big-name companies helped offset lingering concerns about rising government debt levels in Spain, Greece and other countries.

As the end of the year approaches, investors have become more cautious in their trading, not wanting to lose the big gains they’ve made during the market’s rally. The Standard & Poor’s 500 index, which rose as much as 65 percent from its lows in March, has moved little over the past month. Investors are trying to determine how best to position their portfolios for the new year, balancing issues like unemployment and foreign debt problems with the prospects of a rate hike.

In corporate news Thursday, General Electric Co. said it received a $1.4 billion contract to supply wind turbines for power producer Caithness Energy. GE shares added 12 cents to $15.78 in premarket trading.

Meanwhile, shares of Costco Wholesale Corp. added about 1 percent after the wholesale-club operator said its fiscal first-quarter profit edged higher on a turnaround in sales. Shares advanced 55 cents to $59.21.

In other trading Thursday, bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.47 percent from 3.44 percent late Wednesday.

Commodities prices were mostly higher as the dollar slipped against other major currencies. The price of gold rose $4 to $1,125, breaking a four-day slide, while oil prices added 33 cents to $71 a barrel in electronic premarket trading on the New York Mercantile Exchange.

Overseas, Japan’s Nikkei stock average dropped 1.4 percent and Hong Kong’s Hang Seng index gave up 0.2 percent. In afternoon trading in Europe, Britain’s FTSE 100 was up 0.7 percent, Germany’s DAX index rose 1.0 percent, while France’s CAC-40 slipped 0.7 percent.