Stocks Open Higher; Alcoa Leads Dow
Stocks opened higher Thursday as jobless claims dropped below a key level and Dow component Alcoa kicked off earnings season with a beat.
Initial jobless claims plunged by 52,000last week to a much lower-than-expected 565,000. It was the lowest reading since January, and psychologically important because claims have finally dropped below 600,000.
Futures initially spiked on the number but pulled back to where they were before the report as investors dug into the report, learning that the headline number dropped mostly because of fewer-than-expected auto layoffs and continuing claims surged to another record — 6.883 million — tempering enthusiasm for the headline number.
Wholesale inventories shrunk by 0.8 percent in May, better than expected and the 1.3-percent decline in April.
Meanwhile, Warren Buffett chimed in on the stimulus debate, saying unemployment could reach 1 percent and a second stimulus package may be needed.
On the other side of the pond, the Bank of England surprised the market, leaving interest rates unchanged at 0.5 percent and leaving its quantitative-easing program alone. Economists had expected the central bank to increase the program to pump more money into the British economy.
And Germany may have climbed out of the recessionin the second quarter, a government official said today.
Alcoa reported a smaller-than-expected loss after the bell on Wednesday.
As a result, the basic resource sector on the DJ Stoxx 60 index rose 4 percent, giving Asian and European stocks a boost. Energy stocks were also on the rise as oil gained nearly $1 to rise over $61 a barrel.
General Motors is expected to announce that it has emerged from Chapter 11 bankruptcy protection by Friday. Opponents of a plan to sell the bulk of GM assets to a new government-controlled company face a noon deadline to file appeals.
Citigroup shares rose after the bank named a new CFO and a new head of its banking division. The current CFO, Edward "Ned" Kelly, will become a vice chairman focused on strategy and merger activity. John Gerspach, currently controller and chief accounting officer, will succeed him as CFO. The bank also named Eugene McQuade, former head of FleetBoston Financial, as CEO of Citibank.
AIG shares skidded after Citigroup put out a note that said AIG equity was basically worthless. The stock had gained pre-market following news that the insurer planned to sell a unit to MetLife.
Goldman Sachs got a boost after Bank of America/Merrill Lynch raised its rating on the stock to "buy" from "neutral."
Retail stocks were mostly lower as June same-store sales disappointed.
Wal-Mart recently decided to stop reporting monthly sales, which has made it tougher to judge the industry's performance.
Among the early disappointments, teen and children's stores missed their targets.
Costco met expectations, reporting a 6-percent drop in sales for the month, as shoppers bought fewer discretionary items like cameras and mobile phones at the wholesale club.
Target rang up a deeper-than-expected drop in sales but its stock rose.
JCPenney beat expectations and raised its outlook for second-quarter earnings.
A 30-year Treasury note auction will take place on Thursday, which traders are likely to follow closely after the unexpectedly strong auction of $19 billion in 10-year notes. The results for the auction will be released at 1 pm New York time.
And at 2 pm New York time, the House of Financial Services Sub-Committee will hold a congressional hearing on the Federal Reserve as a systemic risk regulator, where Fed Vice-Chairman Donald Kohn will speak.
Finally, the Group of Eight summit continues in Italy for a second day.
- Peter Schacknow contributed to this article.