MarketView for April 26

Summary

The equity markets were higher for a third consecutive day on Thursday after upbeat housing data and stronger-than-expected results from companies, including Citrix Systems, overshadowed some high-profile earnings miss. Shares of Citrix ended the day up 12.4 percent to close at $86.76 a day after the business software company reported strong net income, prompting analysts to raise estimates.

Pending home sales rose virtually hit a two-year high in March, sending the shares of homebuilder Lennar up 5.7 percent to $27.38. the second largest homebuilder, ended the day up 10.1 percent to $9.58 after it reported a narrower-than-expected loss and its largest increase in new orders in seven years.

After the closing bell, Amazon.com chalked up an 8.6 percent gain to $212.50 as the world's largest Internet retailer reported quarterly earnings that exceeded Wall Street's most bullish expectations. Amazon ended the regular session at $195.99, up 0.8 percent.

During the regular session, the positive news on the housing front helped the market overcome data showing a stumbling labor market recovery. Initial claims for jobless benefits fell slightly in the latest week, but missed forecasts.

Among other results, Lockheed Martin Monster Worldwide both had higher-than expected earnings. Lockheed added 0.8 percent to $91.70 and Monster gained 9.7 percent to close at $8.95.

With 254 companies in the S&P 500 reporting, more than 72 percent have exceeded estimates, according to Thomson Reuters data.

Not everything on the earnings front was rosy. Exxon Mobil and Aetna reported a drop in earnings from the year-ago quarter, while United Parcel Service revenue missed Wall Street's expectations. Exxon fell 0.9 percent to $86.07, Aetna slid 8.2 percent to $45.31 and UPS lost 1.8 percent to close at $78.25.

Wal-Mart, whose shares sank earlier this week following a report it stymied a bribery probe of its Mexican operations, was among the Dow's top gainers. Wal-Mart's stock climbed 2.8 percent to close at $58.95.

Chevron also helped to support the Dow Jones Industrial Average as the shares gained 2.3 percent to close at $106.22 after it announced late Wednesday that its quarterly dividend would rise another 9 cents per share.

Approximately 6.7 billion shares changed hands on the three major equity exchanges as compared to the daily average this year of 6.77 billion shares.

Fed Shrinks Balance Sheet

The Federal Reserve's balance sheet contracted for first time in three weeks, prompted by a moderate decline in its bond holdings, Fed data released on Thursday showed. The balance sheet - a broad gauge of its lending to the financial system - stood at $2.849 trillion on April 25, down from $2.858 trillion on April 18.

The Fed's holdings of Treasuries totaled $2.610 trillion as of Wednesday, versus $2.623 trillion the previous week, while overnight direct loans to credit-worthy banks via its discount window averaged $8 million a day during the week, more than the $6 million a day average rate the prior week.

The Fed's ownership of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and the Government National Mortgage Association (Ginnie Mae) was $847.8 billion, down from $855.36 the previous week.

The Fed's holdings of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Bank system totaled $94.57 billion, down from $95.20 billion the previous week.

Claims for Jobless Benefits Disappoint

According to a report released by the Labor Department Thursday morning, the number new claims for jobless benefits fell slightly last week but remained above levels posted earlier this year, suggesting improvement in the labor market is stalling. Initial claims for state unemployment benefits fell by 1,000 claims to 388,000 claims. The report on jobless claims was the latest example of declining momentum in the labor market recovery.

New claims for unemployment benefits fell sharply over the winter but the improvement has largely reversed over the last month. The four-week moving average for new claims, a closely followed measure of labor market trends, rose 6,250 last week to 381,750, its highest since the week that ended January 7.

Many economists believe a mild winter boosted payrolls growth and lowered claims for jobless benefits. They had viewed recent stagnation as payback for those gains. However, the longer claims stay elevated, the more likely it is that an underlying deterioration in the labor market is occurring.

A Labor Department official said there was nothing unusual in the state-level data in the claims report. Thursday's report on claims showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 3,000 to 3.32 million in the week ended April 14. A total of 6.68 million people were claiming unemployment benefits in the week that ended April 7, down 87,160 from the prior week.