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Stocks Close Mixed Following Stagnant Economic Data - U.S. Commentary

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US Market Commentary

Stocks Close Mixed Following Stagnant Economic Data - U.S. Commentary
3/18/2010 4:42 PM ET

TOP MARKET NEWS

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(RTTNews) - Stocks ended Thursday's trading mixed, as the markets digested a series of economic reports that showed only small steps forward for the ailing economy. The Dow and the Nasdaq rose by modest margins, while the S&P 500 closed just below the unchanged mark.

Ahead of the opening bell on Wall Street, the markets received additional reassurance that inflation remains docile, as the Labor Department said that its consumer price index was unchanged in February after increasing by 0.2 percent in each of the five previous months. Economists had been expecting consumer prices to edge up by 0.1 percent.

The data also showed that the core consumer price index, which excludes food and energy prices, rose by 0.1 percent in February following a 0.1 percent decrease in January. The modest increase by the core index came in line with economist estimates.

In a separate report, the Labor Department revealed that initial jobless claims edged down to 457,000 from the previous week's unrevised figure of 462,000. Economists had been expecting a slightly steeper drop in jobless claims to 455,000.

At the same time, the Labor Department said that continuing claims, a reading on the number of people receiving ongoing unemployment help, rose to 4.579 million in the week ended March 6th from the preceding week's revised level of 4.567 million.

After the start of trading, the Philadelphia Federal Reserve revealed that manufacturing activity in the mid-Atlantic region is continuing to show signs of growth in the month of March, with the index of activity in the manufacturing sector rising by more than expected.

The Conference Board also released its report on leading economic indicators in the month of February, showing that its leading economic indicators index increased slightly, marking the eleventh consecutive month of growth.

In corporate news, package delivery giant FedEx Corp. (FDX) reported a profit for the third quarter that more than doubled from the year-ago period and beat analysts' consensus estimate, reflecting higher shipment growth due to the uptick in the global economy.

Looking ahead, the company forecast earnings for the fourth quarter in line with analysts' estimates and raised its fiscal year 2010 earnings outlook, citing "continued modest recovery in the global economy".

In other news, the Congressional Budget Office disclosed that the Democrats' health care bill will cost $940 billion over the next ten years but will also significantly cut the federal deficit over the next 20 years.

According to the CBO, the legislation would reduce the deficit by around $130 billion over the first 10 years after going into effect. For the ten years after that, it would reduce the deficit by $1.2 trillion.

Additionally, the CBO said that bill would increase the number of Americans with health care coverage by 32 million, which would mean 95 percent of Americans would be covered by health care.

In other news from Washington, President Barack Obama signed a $17.6 billion job creation bill aimed at making it easier for companies to hire new workers.

The major averages all saw choppy movement in late-session dealing, closing on a mixed note. The S&P 500 slipped by 0.39 points or less than a tenth of a percent to 1,165.82, while the Dow advanced by 45.50 points or 0.4 percent to 10,779.17 and the Nasdaq edged up by 2.19 points or 0.1 percent to 2,391.28.

Sector News

Despite the lackluster performance by the broader markets, health care stocks posted substantial gains on the day even amid estimates of the fiscal impact of the health care reform bill that make it appear more likely that the legislation will pass.

Telecommunication stocks also moved notably higher on the day, driving the NYSE Arca Telecommunications Index up by 1.6 percent. The day's upside lifted the index to its highest closing level in nearly two months.

Transportation, wireless, pharmaceutical and tobacco stocks also saw buying interest, while oil service and natural gas stocks came under pressure, with the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index sliding by 2.8 percent and 2.1 percent, respectively.

Steel, banking and networking stocks also saw notable weakness on the day, further offsetting the gains in the other equity segments.

Dow Components

Boeing (BA) was the strongest percentage gainer in the Dow, rising by 2.2 percent. The advance lifted shares of the airplane maker to a fresh twenty-one month closing high.

3M (MMM) also saw a strong outing, posting a 1.8 percent gain. The climb helped the stock to end the day its best closing price in nearly two months.

DuPont (DD), Merck (MRK) and Hewlett Packard (HPQ) also saw significant upside, while Alcoa (AA) declined, sliding by 1.1 percent. The decline pulled the stock down off of the nearly two-month low set on Wednesday.

Bank of America (BAC) and Caterpillar (CAT) rounded out some of the other substantial pullbacks that limited the upside for the blue chip index in today's session.

Other Markets

Overseas, stock markets across the Asia-Pacific region closed mostly lower on Thursday. Japan's benchmark Nikkei 225 Index slid by 1 percent, while Hong Kong's Hang Seng Index fell by 0.3 percent.

The major European markets also closed lower on the day. The U.K.'s FTSE 100 Index slipped by less than a tenth of a percent, while the German DAX Index and the French CAC 40 Index declined by 0.2 percent and 0.5 percent, respectively.

In the bond markets, treasuries closed moderately lower following today's bond supply announcements. Subsequently, the yield on the benchmark ten-year note closed at 3.672 percent, posting a gain of 3 basis points.

Looking Ahead

Although the economic calendar on Friday boasts no first-tier economic data, traders may use the session as an opportunity to evaluate their positions in the equity markets.

For comments and feedback: contact editorial@rttnews.com

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