Stocks head higher, despite Europe worries
NEW YORK (AP) — One piece of good news on jobs was enough Thursday on Wall Street.
The stock market popped higher after the Labor Department reported an encouraging decline in weekly claims for unemployment insurance. That one piece of good news was enough to help traders forget about a drumbeat of worrisome developments, like a widening U.S. trade deficit, higher unemployment in Greece and a ratings cut for Spain.’
The major stock indexes all rose, putting the market on track for its first up day this week. At midday, the Dow Jones industrial average was up 23 points to 13,368, a stark reversal from two straight days of triple-digit declines. The Standard & Poor’s 500 was up five to 1,438. The Nasdaq composite index was up seven to 3,058.
That might seem puzzling. But maybe the market is so used to bad news that it’s easy enough to shrug off — particularly the S&P downgrades, which some investors don’t place much faith in anyway. Or maybe people are looking for a reason to invest, anxious to meet year-end investment goals.
‘‘If you look at bank reserves, personal balance sheets, business balance sheets, there’s money on the sidelines that wants to get put to work,’’ said Joe Costigan, director of equity research at Bryn Mawr Trust Company in Pennsylvania. ‘‘And I think that at the moment, any good news is drawing capital to it and we’re now in the process of looking past the bad news.’’
Also fueling the stock market was a note from Citi analysts, upgrading U.S. stocks to the equivalent of buy. The analysts, led by Hasan Tevfik and Robert Buckland, argued that stocks are relatively cheap and that central banks seem likely to take more steps to try to boost the economy.
Still, their report wasn’t all cheery. ‘‘Profits are slowing around the world,’’ they wrote, ‘‘and (earnings-per-share) expectations need to be cut further, in our view.’’
Already this week, the aluminum manufacturer Alcoa kicked off the third-quarter earnings season with a disappointing loss. Thursday, shares of grocery store Safeway slipped 3 percent, losing 51 cents to $15.78, after it reported a lower profit margin. Restaurant chain Ruby Tuesday dipped 9 cents to $6.93 after reporting lower profit late Wednesday.
And that was on top of a stream of separate negative developments Thursday. Among them: The Commerce Department reported that foreign demand declined for American-made cars and farm goods. In Germany, economic researchers predicted the country’s growth would slow, and warned that patience for bailing out weaker European countries was evaporating. Unemployment in Greece, one of the countries surviving on bailouts, hit a record high of just more than 25 percent. And the Standard & Poor’s ratings agency late Wednesday cut its rating on Spain’s debt to just one level above junk status.
In Tokyo, where the International Monetary Fund and the World Bank were meeting, IMF chief Christine Lagarde warned that the global economic recovery is weaker than many had expected. She called for urgent action to fix Europe’s debt problems and an approaching fiscal crisis in the U.S.
Even the jobs news wasn’t enough to persuade everyone. The Labor Department said that weekly applications for unemployment aid fell to their lowest level since February 2008, before the financial crisis. But the unemployment rate is still much higher than it was then — 7.8 percent, compared with 4.9 percent in February 2008. The labor force participation rate is also lower, meaning some unemployed workers have simply given up looking for work, which can make the jobless numbers seem better than they really are.
One stock that made a big move up was Sprint Nextel. Shares soared 15 percent, rising 76 cents to $5.80, after a report that the company could be bought by Softbank, a Japanese cell phone provider.