Stocks rise after surprise drop in unemployment claims, upbeat retail sales; Dow near 11K

By Stephen Bernard, AP
Thursday, October 7, 2010

Stocks climb on positive job news; Dow near 11K

NEW YORK — Stocks are climbing after a surprise dip in unemployment claims and stronger sales reports from retailers.

The Dow Jones industrial average was trading just below 11,000 for the first time since early May, shortly before the “flash crash.”

Traders are upbeat Thursday as the Labor Department says first-time claims for unemployment insurance fell last week. Economists were predicting a slight increase.

Gains are being kept in check as traders prepare for the government’s monthly employment report Friday.

The Dow Jones industrial average is up 24, or 0.2 percent, at 10,991. The S&P 500 is up 3, or 0.3 percent, at 1,163, while the Nasdaq composite index is up 10, or 0.4 percent, at 2,390.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

NEW YORK (AP) — Stock futures climbed Thursday after a surprise dip in weekly unemployment claims and relatively strong monthly retail sales reports.

However, gains were being kept somewhat in check as traders prepare for the government’s key monthly employment report Friday and PepsiCo Inc. kicked off earnings season with mixed results.

The Labor Department said first-time claims for unemployment benefits fell by 11,000 last week to 445,000. Economists polled by Thomson Reuters were predicting a slight increase in claims.

Claims have been falling steadily in recent weeks, but still indicate employers aren’t necessarily ramping up their hiring. Payroll company ADP said Wednesday that private employers slashed jobs in September for the first time in seven months.

Traders might be somewhat overlooking the weekly report on unemployment claims because the Labor Department releases its monthly data Friday. Economists expect the unemployment rate climbed to 9.7 percent last month from 9.6 percent in August.

High unemployment remains a main obstacle to stronger economic growth. Worries about jobs had been keeping a lid on spending in recent months, though retailers reported Thursday that sales improved modestly in September.

Macy’s Inc., Abercrombie & Fitch and Limited Brands Inc., which owns Victoria’s Secret and Bath and Body Works all reported better-than-expected monthly sales.

Ahead of the opening bell, Dow Jones industrial average futures rose 48, or 0.4 percent, to 10,954. Standard & Poor’s 500 index futures rose 5.80, or 0.5 percent, to 1,161.50, while Nasdaq 100 index futures rose 12.75, or 0.6 percent, to 2,017.00.

PepsiCo said its third-quarter profit jumped in part on revenue gains following its acquisition of its two largest bottlers earlier this year. Earnings matched expectations, but the company narrowed its earnings outlook to a level below analysts’ forecasts.

Alcoa Inc. will be the first component of the Dow Jones industrial average to report earnings when it releases results after the market closes.

PepsiCo and Alcoa provide a glimpse into how companies were able to deal with slowing economic growth over the summer and provide insight into where corporate executives believe the economy is headed. Analysts have said earnings outlooks and revenue growth will be vital to propelling stocks higher in the next few weeks as hundreds of companies report results.

Shares of PepsiCo fell $1.72, or 2.5 percent, to $66.39 in pre-opening trading. Alcoa shares rose 17 cents to $12.54.

Limited Brands shares rose 91 cents, or 3.3 percent, to $28.50, while Abercrombie & Fitch jumped $3.10, or 8 percent, to $41.69. Macy’s dipped 1 cent to $23.69.

Bond prices remained nearly their lowest levels since January 2009 as traders expect the Federal Reserve to resume a program to buy Treasurys as part of a plan to stimulate the economy. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.40 percent from 2.39 percent late Wednesday. Its yield is often used to help set interest rates on loans.

The dollar continued to fall against other major currencies because it would lose value if the Fed starts buying bonds again and interest rates fall further. Gold, which is considered a safe alternative to the dollar, hit a new record of $1,366.00 an ounce early Thursday before pulling back to $1,358.60 an ounce.

Overseas, Britain’s FTSE 100 rose 0.3 percent, Germany’s DAX index gained 0.5 percent, and France’s CAC-40 rose 0.6 percent. Japan’s Nikkei stock average fell 0.1 percent.

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