US markets recover

Financial and technology stocks help indices end in the green

Stocks at Wall Street ended higher on Thursday, 05 January, 2009. Couple of better than earning reports helped stocks gain momentum which had otherwise had a slow start due to a weaker than expected guidance from Cisco Systems after yesterday's close. Economic reports dominated the first half today and all were almost in line with expectations pointing out towards an economy in recession. Financial and technology sectors contributed to the turnaround.

After opening 103 points lower earlier in the day, The Dow Jones Industrial Average ended higher by 106 points at 8,063, the Nasdaq closed higher by 31 points at 1,546 and the S&P 500 closed higher by 13 points at 845.

Indices managed a turnaround after reports hit the wires that Treasury Secretary Geithner is expected to unveil a comprehensive financial framework plan on next Monday. The traders anticipated that the idea that the government's forthcoming plan to shore-up banks could provide a good reason for stocks to rally in the coming months.

Among major earning reports for the day, Cisco topped earnings expectations, but issued downside revenue guidance. Visa and MasterCard both topped earnings expectations.

Many retailers disclosed their same store sales data which were disappointing as expected. Surprisingly, Wal-Mart witnessed a 2.1% jump in same store sales in January, 2009 and this gave the stock a good boost today.

Among major economic reports of the day, there were quite a few. The Commerce Department reported today that new orders for manufactured goods in US fell 3.9% in December for the fifth consecutive month of declines. It was a little more thane expected. In November, orders fell 6.5%, revised lower from a previously estimated drop of 4.6%.

The Labor Department reported today that the number of new claims for state unemployment benefits surged to their highest level since 1982. Initial jobless claims rose 35,000 to a seasonally adjusted 626,000 in the week ended 31 January, 2009. This put the number at the highest level in 26 years. Meanwhile, the four-week average of new claims rose by 39,000 to 582,250. Continuing jobless claims rose by 20,000 in the week ended 24 January, 2009 to a seasonally adjusted 4.79 million, the most since the government's records began in 1967.

Initial claims represent job destruction, while the level of continuing claims indicates how hard or easy it is for displaced workers to find new employment. The claims data show that businesses are laying off workers at a rapid pace and that finding a replacement job is proving ever harder for those who've lost work.

In a separate report, the Labor Department reported today that U.S. firms cut back on their employees' working hours in the fourth quarter, keeping productivity growth rising faster than expected and suppressing output. Productivity in the non-farm business sector increased at a 3.2% annualized rate as output fell 5.5% and hours worked dropped 8.4%. The decline in output was the largest since 1982 while the decline in hours was the weakest since 1975.

Oil prices gave up earlier losses and ended higher for the day on Thursday, 05 February, 2009 as US stocks rallied today and OPEC hinted at further production cuts. Prices initially had dropped as yesterday's weekly inventory report by the Energy department showed that crude inventories rose more than expected in the last week. Gasoline prices too jumped considerably higher today.

On Thursday, crude-oil futures for light sweet crude for March delivery closed at $41.17/barrel (higher by $0.85 or 2.1%) on the New York Mercantile Exchange. Earlier during the day, it touched a low of $39.46. Last week, crude prices ended lower by 10%. In January, 2009, crude shed 14%.

January job reports will be the main area of focus for tomorrow's market momentum. Market anticipates another half a million of layoffs to be announced in tomorrow's report.