The bulls have regained the upper hand as markets look ready to settle into a real summer lull.
The events though that could shake things up Friday are existing home sales for July, reported at 10 am, and a speech by Fed Chairman Ben Bernanke, also at 10 am. Bernanke speaks to the annual Kansas City Fed symposium in Jackson Hole, Wyo. He will likely give an update on the financial crisis, the Fed's rescue programs, and the economy.
July's existing home sales data follows a series of improving housing data that some economists say could mean a bottoming in housing.
"We expect to see a month-over-month increase in (home) sales of 2.1 percent ... If we're showing improvement sequentially, any increase is going to be good enough. A negative would be something that comes out of the blue," said Art Hogan, managing director at Jefferies.
Stocks chose to ignore disappointing jobless claims data Thursday and, instead, latched onto a surprisingly good Philadelphia Fed survey which showed a pickup in mid-Atlantic manufacturing activity. The Dow rose 70 points to 9350, while the S&P 500 was back above the psychologically key 1000 mark. It finished at 1007, up 10 points or 1 percent.
Financial stocks were the best performers, with AIG bounding higher after its CEO said it would repay its bailout loans. AIG's outsized 21 percent gain was also fueled by short covering, according to traders.
"It was impressively benign today. There's nothing going on," said Patrick Kernan, who trades S&P 500 options. Kernan, a principal with Cardinal Capital, said trading ahead of Friday's expiration of options has been quiet.
"It feels like interest in trading for the next couple of weeks might be low, considering how this expiration went. It was shockingly slow," he said.
But investors appear to be expecting activity to pick up in September.
"This week we've seen a lot more put buying than normal and that's actually been stretching out across all terms, from September to March," he said.
"We've seen a lot in September, pretty far out of the money stuff — 850s and 875s. Realistically, I don't think that they're doing it because they think we're going there. There's just some people that want to buy protection," Kernan said.
From discussions with a variety of traders, there is a view that the market may be quiet until Labor Day. Several pointed to a respite for markets until Congress returns in September. For now, there is also a view that health-care reform is stalling, which is helping health care stocks and the market, in general. Also helping was a turnaround in the Shanghai market overnight Thursday.
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The big concern though for the rest of the summer is that the spotty economic data continue to show progress. Jobless claims have been a disappointment this month, and are not signaling the expected degree of slow down in job losses. Already, traders are focusing on the August employment report Sept. 4.
Thursday's report showed jobless claims rose unexpectedly for a second week to a seasonally adjusted 576,000 last week, from a revised figure of 561,000. Economists had expected a drop to 550,000. Tony Crescenzi, strategist at PIMCO, said in a note that the current rate of claims suggests job losses continue at a rate higher than what was reported in July when non farm payrolls fell by 247,000.
Hogan said a surprising bright spot might be the back-to-school shopping season, which is basically being ignored by the market. He said the retailers' earnings in the past week were not good, but the outlooks were decent, and sales could be better than the market expects.
Speaking of retailers, KKR said after the bell that it plans a $750 million IPOfor its Dollar General discount chain, which would be among the year's largest IPOs.
Commodities were mixed in Thursday's market, as the dollar was slightly lower against the euro at $1.4257.
Natural gas was the big mover, tumbling 5.6 percent on inventory data, to finish the session below the $3 level. Natural gas for September delivery fell to $2.945 per million British thermal units, its lowest price in seven years. Oil, meanwhile. continued its move higher, gaining $0.12 to $72.54 per barrel.
"I look at natural gas now, like oil when it was at $35," said Hogan. He said there are a lot of shorts around the $3 mark so there could be a lot of covering in that range.
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