MarketView for April 11

Summary

The major equity indexes chalked up their fourth straight day of gains on Thursday, sending the Dow Jones Industrial Index and the S&P 500 index to new closing highs as positive data on the labor market and an encouraging retail outlook eased recent concerns about economic growth.

Nonetheless, the Nasdaq's gains were limited as technology stocks sold off on an industry report showing shipments of personal computers had fallen significantly in the first quarter. Despite the S&P 500's gain of 11.7 percent this year, investors have fretted about the pace of recovery, especially after last week's weak March payrolls report.

Jobless claims fell far more than expected in the latest week, dropping to the lower end of the range for the year. In another sign that the economy might be in better shape than some recent data had indicated, retail executives and analysts forecast improved same-store sales in April after mixed results in March.

Hewlett-Packard fell 6.5 percent to $20.88 as the S&P 500's top percentage loser, followed by Microsoft, down 4.5 percent, closing at $28.94. Microsoft was also hit after Goldman Sachs downgraded the stock to "sell" from "neutral," citing "worsening PC trends and a lack of traction in tablets and smart phones."

Both HP and Microsoft are Dow components, but the index saw plenty of strength from other members. Three of the Dow's five largest gainers, Pfizer, Boeing and Home Depot reached new 52-week highs.

All three indexes finished higher for the fourth straight day. Both the Dow and the S&P 500 reached new all-time intraday highs in midday trading before ending at new closing highs. The Dow climbed to an intraday record peak at 14,887.51, while the S&P 500 set a record session high at 1,597.35.

The Dow received its best influence from Pfizer, up 2.4 percent at $30.64 after JPMorgan raised its target price on the company’s shares to $33 from $32.

Acadia Pharmaceuticals rose 64.4 percent to $13.10 after the Company indicated that data from an initial late-stage trial would be sufficient to file for approval for its experimental antipsychotic drug for Parkinson's disease patients. Earlier, Acadia's stock touched a session high at $13.92, its highest point since November 2007.

Other economic data indicated that import prices fell 0.5 percent last month, in line with expectations, while export prices fell 0.4 percent, signaling inflation pressure remained tepid and would allow the Fed to continue with its current monetary policy.

Approximately 6.17 billion shares changed hands on the three major equity exchanges , a number that was below the daily average so far this year of about 6.36 billion shares.

New Unemployment Benefits Claims Decline

The number of new claims for unemployment benefits fell more than expected last week, easing fears of a marked deterioration in labor market conditions after a surprise stumble in job growth in March. According to a report released by the Labor Department on Thursday, initial claims for state unemployment benefits fell by 42,000 claims to a seasonally adjusted 346,000 claims, thereby unwinding the increase of the prior week that appeared related to difficulties adjusting the data for seasonal variations.

It was the largest weekly drop since mid-November. The decline suggests the sharp slowdown in employment growth in March was an aberration. However, employers added only 88,000 workers to payrolls in March - the fewest in nine months - after a solid 268,000 increase in February.

The data suggests that the slowdown in job creation reflected seasonal hiring being brought forward rather than underlying weakness in the labor market. Jobless claims are now back at the lower end of their range for this year, suggesting the labor market recovery remains on track.

Differences in the timing of Easter and school spring breaks, which likely threw off the model used to smooth the data for seasonal fluctuations, had been blamed for the spike in claims during the week ended March 30.

A Labor Department analyst said no states had been estimated and there was nothing unusual in the state-level data for the latest week. He noted, however, that the floating Easter holiday and spring breaks continued to pose challenges for the so-called seasonal factor. The seasonal distortions in the data will probably remain over the next few weeks.

The four-week moving average for new claims, a better measure of labor market trends, increased 3,000 to 358,000. It remains close to a level economists normally associate with payroll gains of about 150,000 per month.

Economists are keeping a close eye on jobless claims data for signs of layoffs related to $85 billion in government budget cuts known as the "sequester." Opinion is divided on what impact the spending cuts will have on the labor market. Claims are also on the radar of the Federal Reserve, which has tied U.S. monetary policy to the labor market.

A Reuter’s survey released on Thursday forecast the unemployment rate averaging 7.6 percent this year. The jobless rate dropped a tenth of a percentage point to 7.6 percent in March, but that was due to people leaving the labor force.

A second report from the Labor Department showed little sign of inflation, which should allow the Fed to keep policy very accommodative. Import prices slipped 0.5 percent last month after rising 0.6 percent in February. In the 12 months to March, import prices dropped 2.7 percent. Prices last month were subdued by a drop in the cost of petroleum and a strong dollar.