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Jobless Drop Buoys Stocks; Banks Gain

Thursday, 4 Jun 2009 | 7:06 PM ET

Stocks advanced Thursday after a report showed jobless claims fell last week and banks gained.

The Dow Jones Industrial Average rose about 75 points, or 0.9 percent. The S&P 500 gained 1.1 percent and the Nasdaq added 1.3 percent.

This came after stocks snapped a four-day winning streakWednesday after a trio of weak economic reports tarnished the shine on recovery hopes.

The market got off to a wobbly start again today after three-quarters of retailers reporting chain-store sales this morning missed their targets, dashing hopes that consumers are again digging out their wallets. But a drop in jobless claims helped turn the day around.

Initial jobless claims fell by 4,000last week, the third straight week of decline. Continuing claims fell to 6.735 million. It was the first time that continuing claims declined since early January, following 17 straight weeks of record highs.

The report was an encouraging sign ahead of tomorrow's jobs report. Still, economists expect to see another 525,000 jobs dropped from nonfarm payrolls, after a loss of 539,000 in the previous month, and for the unemployment rate to tick up to 9.2 percent from 8.9 percent.

Meanwhile, nonfarm productivity rose 1.6 percent in the first quarter, much higher than the initial estimate of 0.8 percent and the 0.6 percent drop in the fourth quarter.

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Financials were the day's big star, with the S&P financial index finishing up 3.5 percent, after RBC Capital Markets upgraded its rating on the sector, saying it's on track for a multiyear bull market.

Citigroup and Bank of America each gained more than 5 percent.

Goldman Sachs and Morgan Stanley also rose about 5 percent each after Bernstein hiked its rating on the stocks to "outperform" as well as its price targets and earnings expectations.

Oil stocks also helped fuel the Dow's gains, with ExxonMobil and Chevron gaining 1.3 percent and 2.2 percent, respectively, after crude prices resumed their ascent, settling at $68.81 a barrel.

Goldman Sachs said it expects oil will be at $85 a barrel by year end.

Keeping a lid on gains was the May sales reports from the nation's largest retailers as 76 percent of retailers missed estimates.

For the first time, Wal-Mart didn't release a monthly report, having said last month that henceforth, figures would only be issued quarterly.

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What the discount giant did announce this morning was plans to hire 22,000 more employees at its namesake store.

As for the rest of the lot, we're gonna need a cleanup in aisle 9.

Costco, Target and Hot Topic all reported drops more than analysts expected, while The Buckle and off-price chain TJX exceeded expectations.

GM shares jumped 21 percent following news that even when GM emerges from bankruptcy protection it will still be publicly owned — in fact, even more so than before, with taxpayers owning a 60 percent stakein the automaker. And, the company still plans to release financial statements, even after it goes private.

Meanwhile, Chrysler's dealer controversy should come to a head this morning, with a bankruptcy judge expected to rule on whether the automaker can go ahead with the planned shutdown of hundreds of dealerships as it proceeds through bankruptcy.

Shares of Valero fell after the company repriced its public offering of 40 million shares to $18, a slight discount to Wednesday's close but sharply below the original estimate. Also, BMO cut its rating of Valero to "underperform" from "market perform" as the company announced earlier this week it would be suspending its expansion of the Valero Port Arthur Refinery.

In tech land, shares of Wind River Systems soared 47 percent after Intel agreed to buy the company, which makes software for cellphones and other gadgets, for $11.50 a share, or $884 million. Intel shares rose 1.2 percent.

And Google shares rose 2 percent after Citigroup raised its price target on the stock to $580 from $450, anticipating second-quarter results will meet expectations and higher earnings for next year.

Microsoft, which just launched rival search engine, Bing, saw its shares tick up 0.5 percent.

Yahoo shares fell after the Internet portal sued the NFL players association, claiming that it shouldn't have to pay royalties to use players' statistics, photos and other data in its fantasy-football game on the grounds that that information is already public.

Palm shares rose 2.2 percent after the gadget maker's answer to the iPhone, the Pre, got some positive reviews from tech columnists including Walt Mossberg of the Wall Street Journal and David Pogue of the New York Times.

Shares of rivals Apple and Research In Motion also rose.

- Peter Schacknow, senior producer, CNBC Breaking News Desk, contributed to this report.

Still to Come:

FRIDAY: May jobs report; consumer credit

Send comments to cindy.perman@nbcuni.com.

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