Banks, Oils Lift Stocks
Updated from 4:24 p.m. EDT
The major indices in New York pared gains but still closed modestly higher on Thursday as financials and energy stocks offset a decline in the housing sector, with some help from better-than-expected demand in the Treasury's 30-year bond auction.
The
Dow Jones Industrial Average
finished up 31.90 points, or 0.4%, at 8770.92, while the
S&P 500
was higher by 5.74 points, or 0.6%, at 944.89. The
Nasdaq
was better by 9.29 points, or 0.5%, at 1862.37.
Alcoa
(AA) - Get Report
and
Pfizer
(PFE) - Get Report
were up 6.4% and 4.1%, respectively, on the Dow. But it was
Bank of America
(BAC) - Get Report
, rising 8.3%, that led the index after an upgrade.
Financials in general were higher, with the KBW Bank Index adding 2.6%.
UBS
(UBS) - Get Report
rose 3.8%;
Credit Suisse
(CS) - Get Report
added 2.2%; and
Deutsche Bank
(DB) - Get Report
added 2.8%.
Stocks got a boost after the U.S. Treasury wrapped up the last leg of a $65 billion Treasury auction. The government sold $11 billion in 30-year notes with a bid to cover of 2.68 vs. the recent average of 2.21, and a high yield of 4.72%. The bid to cover ratio, a gauge of interest, is the number of bids received divided by those accepted.
Thursday's more favorable auction follows the Treasury's $19 billion auction of 10-year notes on Wednesday, which had a high yield of 3.99%, more than some traders had expected, prompting some worries about rising interest rates.
Longer-dated Treasuries were rising in price. The 10-year was up 22/32, yielding 3.86%, while the 30-year was higher by 1-1/32, to yield 4.69%.
Although the market hasn't moved significantly to the upside in recent days, there also hasn't been the sizable pullback many observers have anticipated for weeks.
"I think we're in the midst of a summer rally, even though we'll probably continue to endure light volume," says Peter Cardillo, chief market economist, Avalon Partners. "The market is focusing on recovery, and with the still hefty amount of cash on the sidelines, I think it continues during the summer months."
The Department of Labor offered some signs of economic improvement -- or at least a slowing in deterioration --- early Thursday reporting that initial
jobless claims
fell to 601,000 last week, from and upwardly revised 625,000 the week prior. Expectations were for 615,000 new claims. Still, continuing claims increased 59,000 last week to 6.816 million.
Meanwhile, the Commerce Department said retails sales altogether and factoring out autos both increased 0.5% in May, after an upwardly revised 0.2% decline in April. Expectations were for the 0.5% increase overall, but for just an 0.2% increase ex-autos.
The Commerce Department also reported that business inventories declined by 1.1% in April, vs. expectations for a 1% decline and after a revised 1.3% dropdown in March.
It will probably be two more months before we see a number that signals a build in inventory, says Marc Pado, U.S. market strategist Cantor Fitzgerald, "but we're getting anecdotal evidence through orders and also company statements." The increase in new orders in May is likely to cause inventory to deplete further setting it up to start to rebuild thereafter, as early as June, he says.
In other data Thursday, RealtyTrac said foreclosure filings fell 6% in May from April, but were up 18% year over year. May marked the third highest level of foreclosure activity on record.
For those looking to buy a house, the news wasn't particularly sunny. Freddie Mac said 30-year mortgages averaged 5.59% for the week ended June 11, up from 5.29% last week and the highest since November 2008. Adjustable-rate mortgages also increased -- the average one-year ARM is now 5.04%.
The housing sector was not in great shape Thursday:
Toll Brothers
(TOL) - Get Report
fell 2.5%;
Pulte Homes
(PHM) - Get Report
lost 5.7%;
Centex
(CTX)
fell 5.4%; and
Lennar
(LEN) - Get Report
shed 5.3%.
In corporate news, Bank of America CEO Ken Lewis testified before Congress on whether he was pressured by the Treasury and
Federal Reserve
to go through with the acquisition of Merrill Lynch in the face of massive losses as well as when he was aware of those losses.
KBW upgraded
to outperform from market perform on Thursday. At the same time, Bernstein raised its rating for
Goldman Sachs
(GS) - Get Report
and
Morgan Stanley
(MS) - Get Report
to outperform, raising its price target for Goldman to $176 from $113.
Also,
Palm
(PALM)
shares surged more than 12% higher after the company confirmed Thursday that Chief Executive Ed Colligan is stepping down to be replaced by Jon Rubinstein, a former
Apple
(AAPL) - Get Report
executive who's been atop Palm's revitalization efforts. Aside from that change, there were also reports that it is preparing
, a lower-priced follow-up to its buzzing Pre phone.
Elsewhere, commodities stayed in the spotlight as crude oil rose $1.35 to $72.68 a barrel. The International Energy Agency said on Thursday that the slump in global oil demand for the year may be less severe than previously expected, the first upward revision to its estimates in 10 months. That follows an inventory drawdown last week and an improved forecast form the Energy Information Administration earlier in the week.
Among oil stocks,
Chevron
(CVX) - Get Report
rose 2.4%,
Chesapeake Energy
(CHK) - Get Report
increased 1.6%, and
PetroChina
(PTR) - Get Report
rose 2%.
The dollar was recently stronger vs. the yen, pound and euro. Gold, meanwhile, rose $7.30 to $962.
Stocks overseas were mostly higher. In Europe, London's FTSE 100 and Frankfurt's Dax were up 0.6% and 1.1%, respectively. Japan's Nikkei edged down 0.1%, while Hong Kong's Hang Seng climbed 0.03%.
