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Thursday, 26 September 2013
U.S. Stocks Snap 5-Day Drop as Jobless Data Offset Budget
By Lu Wang & Sofia Horta e Costa - Sep 27, 2013 12:00 AM GMT+0400
U.S. stocks rose, halting the longest slump this year for the Standard & Poor’s 500 Index, as an unexpected drop in jobless claims overshadowed concern that a budget impasse could hurt economic growth.
The S&P 500 rose 0.4 percent to 1,698.67 at 4 p.m. in New York, extending its third-quarter rally to 5.8 percent.
Traders work on the floor of the New York Stock Exchange in New York. Photographer: Scott Eells/Bloomberg
Sept. 26 (Bloomberg) -- The number of Americans filing applications for unemployment benefits unexpectedly declined last week, showing further progress in the labor market. Jobless claims decreased by 5,000 to 305,000 in the week ended Sept. 21, a Labor Department report showed today in Washington. Deirdre Bolton and Sara Eisen report on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Sept. 26 (Bloomberg) -- Mark Zandi, chief economist at Moody's Analytics Inc., and David Plouffe, a former adviser to U.S. President Barack Obama and a Bloomberg contributor, talk about the potential impact on the U.S. economy if an agreement on the nation's debt ceiling is not reached. They speak with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "Market Makers." (Source: Bloomberg)
“Economic news have been reasonably good,” Mark Foster, chief investment officer who oversees $620 million at Kirr Marbach & Co. in Columbus, Indiana, said in a telephone interview. “On the negative side, we have the short-term budget issues and debt ceiling. I don’t think that’ll end up being a major issue. People just get somewhat immune to all of that.”
The benchmark index declined 1.9 percent during a five-day losing streak through yesterday, retreating from an all-time high on Sept. 18, when the Federal Reserve refrained from reducing the pace of stimulus. Investors have been watching economic reports to help determine whether growth is sufficient for the central bank to begin cutting bond purchases at its next meeting in October.
A Labor Department report today showed the number of Americans filing applications for unemployment benefits unexpectedly fell last week, indicating further progress in the labor market. The economy expanded at faster pace in the second quarter from the previous three months, with gross domestic product rising at a 2.5 percent annualized rate, the Commerce Department said.
A separate report added to signs that rising mortgage rates may have slowed housing market momentum. Fewer Americans signed contracts in August to buy previously owned homes, figures from the National Association of Realtors showed. Data yesterday indicated purchases of new homes rose in August, capping the weakest two months this year.
Investors are also weighing whether lawmakers can avoid a looming government shutdown, with the S&P 500 (SPX) paring an earlier gain of as much as 0.7 percent after House Speaker John Boehner, an Ohio Republican, said he doesn’t expect his chamber to pass a stopgap spending bill expected from the Senate. He also said he does not expect a government shutdown to happen.
The Senate likely will not vote on its version of the bill until this weekend, leaving the House just one full workday to act before spending authority for the federal government expires on Oct. 1. The House and Senate are at odds over language that withdraws funding for the 2010 health-care law.
The Office of Management and Budget estimated 30 days of shutdowns in 1995 and 1996 cost more than $1.4 billion, or $2.09 billion in today’s dollars.
On another fiscal front, Treasury Secretary Jacob J. Lew told Congress yesterday that the extraordinary measures being used to avoid breaching the debt ceiling “will be exhausted no later than Oct. 17.” Failure to increase the debt limit could lead to a downgrade of the U.S. government’s credit rating.
The S&P 500’s losing streak through yesterday was the index’s longest since Dec. 28, when lawmakers wrangled over impending automatic spending cuts and tax increases known as the fiscal cliff. The index dropped as much as 3.4 percent over the last two weeks of 2012 and then jumped 5 percent in January for the best start to a year since 1997 after a last-minute budget deal was struck.
“Washington has been dragging their feet as of late but eventually they’ll be forced into action,” said Patrick Spencer, head of U.S. equity sales for Robert W. Baird & Co. in London. “We’ve been down this road before. It’s quite natural and healthy to have pull-backs in a bull market. We’ll shift into a stronger gear with a settlement on the budget and what I think will be a very positive earnings season.”