Futures Gain After Jobless Claims

Futures added to slight gains despite news of a slight dip in jobless claims that fell short of expectations, although productivity grew at a faster pace than previously thought in the first quarter.

The firmer tone comes a day after the market suffered its biggest losses since last August as investors waited for more clues on the strength of the economy ahead of Friday's government jobs report.

Initial claims for unemploymentfell 6,000 to 422,000, the Labor Department reported. Economists surveyed by Reuters had expected claims to fall to 415,000. The four-week average of claims fell to 425,000. Job growth occurs when jobless claims are below 375,000, economists say.

U.S. nonfarm productivity grew at a 1.8 percent annual rate in the first quarter, slightly more than previously estimated, while labor costs only increased by 0.7 percent, the Labor Department said. Productivity had previously been reported as growing at a 1.6 percent rate.

"We've been through a couple week period here where basically every piece of economic data has just been awful. This was a little less awful, but still awful," John Canally, investment strategist and economist for LPL Financial in Boston, told Reuters.

"You get to a certain point with the economic data that it is just so bad and expectations are so low, that anything that is not a disaster pushes the market up, and we may be getting that, although the big news really is tomorrow's jobs report," Cannally added.

Retailers began posting monthly sales figures with mixed results amid higher prices for gasoline prices.

Costco's same-store sales in May beat estimates thanks to higher gas prices, rising 13 percent, while BJ's Wholesale also did better-than-expected. But Limited Brands, owner of Victoria's Secret, Gap, Target and TJX all missed.


Overall, analysts expect the rate of growth for U.S. chain stores sales will slow to a 5.4 percent gain compared with a gain of 8.9 percent in April, according to Thomson Reuters. Last May, sales rose only 2.6 percent.

A high unemployment rate means the Federal Reserve's ultra-easy monetary policies remained the right course of action, top Fed officials said Wednesday. High unemployment is not a "quickly resolvable problem," but April's job gains showed the recovery is on a firmer footing, Cleveland Fed President Sandra Pianalto said.

Chinese hackers were suspected of trying to steal passwordsfrom hundreds of Google email accounts, including senior U.S. government officials, Chinese activists and journalists, the Internet company said. China's Foreign Ministry denied the accusations.

U.S. officials softened rules that could have cut off tuition aid to some programs run by for-profit colleges. Corinthian Colleges and Apollo Group jumped in premarket trading.

Starbucks was among stocks in focus after it said it had signed an agreement with its joint venture partner in South China, Maxim’s Caterers that gives the chain full control of more than half of its retail stores in mainland China, Reuters said.

European shares fell as disappointing data from the United States prompted concerns over a slowdown in the pace of economic recovery, causing a pull back in appetite for riskier assets.

Meanwhile, European Central Bank President Jean-Claude Trichet Thursday said there should be a euro-zone finance ministryto oversee euro zone fiscal policy.

In Asia, markets tumbled Thursday on heightened concerns about the global economic outlook, while political woes in Japan added to Tokyo selling as Prime Minister Naoto Kan said he would resign after he gets a nuclear crisis under control.

On Tap This Week:

THURSDAY: Chain store sales, natural gas inventories, oil inventories, money supply.
FRIDAY: Non-farm payroll report, ISM non-manufacturing index; Wal-Mart shareholder meeting.

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