US stocks manage to stay steady and strong

Economic data checks in mixed in nature

US stocks finished with modest gains on Thursday, 02 September 2010. After a fierce rally yesterday and overnight rally in Asian markets, stocks started the day flat at the open but then gradually tried to pick up momentum in the course of the day. Stocks faltered at times and indices dropped in the red in between. Economic data dominated the day and the same that checked in were mixed in nature.



For the day, that ended on Thursday, 02 September 2010, Dow ended higher by 50.63 points at 10,320.1. Nasdaq ended higher by 23.17 points at 2,200.01. S&P 500 ended higher by 9.81 points at 1,090.1.

The Dow traded in a tight range of just over 55 points for most of the day before breaking higher in the final hour of trading, led by consumer discretionary and industrial stocks. More defensive sectors, including utilities, telecommunications and health-care stocks, were the three worst performers of the day.

It was a day when economic data dominated the most part. First, the National Association of Realtors reported on Thursday, 02 September 2010 that pending home sales in July rose 5.2% from downwardly revised June levels. The July index came in better than the 1% monthly drop that market had forecast, though sales in July were nonetheless 19.1% below those during the same month in 2009.

Then, a government report in US showed on Thursday, 02 September 2010 that the productivity of American businesses fell a revised 1.8% in the second quarter, the biggest drop in almost four years and twice as much as the government initially reported. Productivity is defined as real output divided by hours worked.

Real output grew just 1.6% in the second quarter, compared with a prior estimate of 2.6%. Output expanded at a much faster 5% rate in the first three months of 2010. Hours worked rose at a 3.5% annualized rate, the fastest in four years.

But the most important data for the day was the initial claims data. The Labor Department in US reported on Thursday, 02 September 2010 that the number of people applying for unemployment benefits fell by 6,000 to 472,000 in the week ended 28 August. Though the number showed a decline, first-time claims remained at an elevated level.

The four-week average of initial claims, a better gauge of employment trends than the volatile week-to-week number declined 2,500 to 485,500.

Retailers have outperformed this session. Their strength is underpinned by a large batch of better-than-expected same-store sales results for August.

In the merger and acquisition area, there were quite a few headlines. It included the acquisition of Burger King by 3G Capital for $24 per share in cash. Elsewhere in the merger and acquisition space, Hewlett-Packard increased its offer to acquire 3Par to $33 per share in cash. On the other hand, Dell said it is done with bidding for 3Par.

Volume was low, with just over 3.8 billion shares changing hands in NYSE Composite trading. The 2010 daily average is about 5 billion shares, although the August average was just over 4 billion shares.

Crude prices ended substantially higher on Thursday, 03 September 2010 at Nymex. Prices ended higher as a fire at a Mexican oil platform raised concerns about output of crude. Certain economic data also helped crude climb up. On Thursday, crude oil futures for light sweet crude for October delivery closed at $75.02/barrel (higher by $1.11 or 1.5%). Last week, crude ended higher by 1.8%.

Precious metals ended higher on Thursday, 02 September 2010 at Comex. Prices almost touched their record high as economic data once again increased the appeal of precious metals as an alternate investment. On Thursday, gold for December delivery ended at $1,253.4 an ounce, higher by $5.3 (0.4%) on the New York Mercantile Exchange. It was a little shy of touching the all time record high of $1,258.3. On Thursday, December Comex silver futures ended higher by 28 cents (1.4%) to $19.67. It was silver's highest close since March 2008, when it closed at 19.89 an ounce.

Indian ADRs ended mostly higher on Thursday. Tata Motors and HDFC Bank were the main gainers soaring 2.5% and 0.6% respectively.

Tomorrow, the economic report expected is the job report and unemployment data from the Labor Department. Other than that, earning reports will continue to trickle in.