MarketView for April 25

Summary

It was a positive day across the board on Thursday, with Wall Street reacting to stronger-than-expected earnings and a large decline in weekly jobless claims.

The S&P 500, up for five straight sessions, traded within a point of its record closing high before shedding about half of the day's gains. The high was near the 1,593 level that is expected to be technical resistance.

Telecommunications companies' shares led the S&P 500's advance. Verizon hit a 13-year high with a 2.7 percent jump to $53.22 after sources told Reuters it has hired advisers to prepare a possible bid to take full control of Verizon Wireless.

Dow Chemical posted a 33 percent increase in quarterly earnings as farmers in the Americas bought more of its seeds and pesticides, sending its shares up 5.6 percent to $33.97.

Investors expected the first quarter to be difficult for corporate America after cuts in government spending and the increase in the payroll tax earlier in the year. That is appearing not to be the case. And as a result, the S&P 500 index hit a high of 1,592.64 - just a bit below its record closing high of 1,593.37 set on April 11.

Expectations were lowered sharply before the start of the current reporting season, and 68 percent of S&P 500 companies that have reported results so far have beaten earnings forecasts. However, less than 42 percent have exceeded their revenue forecasts - below the average of 52 percent over the last four quarters.

After the closing bell, Amazon reported solid first-quarter earnings as it controlled shipping expenses and other costs. Nonetheless, international revenue growth slowed sending its shares down 3.9 percent to $264 in after-hours trading, more than offsetting the 2.2 percent gain in the regular session when the stock closed at $274.70.

Thursday's data gave a less worrisome view of the economy than other data of late. Initial claims for unemployment benefits in the latest week fell by 16,000 claims to a seasonally adjusted 339,000 claims as compared to the Street’s expectations for 351,000 claims.

Cliffs Natural Resources rose 15 percent to $20.95 after it posted earnings late on Wednesday that well exceeded analyst expectations.

On the Nasdaq, Alexion rose nearly 11 percent after the company reported earnings and revenue above expectations. Akamai Tech rose almost 18 percent after a surge in earnings and a rosy outlook for this quarter. Alexion shares rose 10.7 percent to end at $98.82 and Akamai chalked up a 17.7 percent gain to close at $42.48.

UPS ended the day up 2.3 percent to close at $85.42 after it reported quarterly earnings above Street estimates. Exxon Mobil and 3M Co bucked the trend as their shares ended the day lower.

Shares of Exxon fell1.5 percent to $88.07 after it said quarterly profit edged up, helped by its chemicals business, but oil and gas production sere lower. Another component of the Dow, 3M lost 2.8 percent to $104.88 after the manufacturer posted first-quarter earnings and revenue that missed Street's expectations and cut its 2013 earnings forecast.

Shares of J.C. Penney rose more than 7 percent to $16.39 in extended-hours trading after billionaire investor George Soros reported a 7.9 percent passive stake in the struggling department store chain. In the regular session, J.C. Penney shares rose 0.3 percent to close at $15.24.

About 7.0 billion shares changed hands on the three major equity exchanges, more than the daily average so far this year of about 6.38 billion shares.

New Unemployment Insurance Claims Fall

The number of Americans filing new claims for unemployment benefits fell last week by a surprisingly large 16,000 claims, a sign that we are still moving towards a labor market recovery despite signs of slower growth. Initial claims for state unemployment benefits dropped to a seasonally adjusted 339,000, the Labor Department said on Thursday. The four-week moving average for new claims, a less volatile measure of labor market trends, fell 4,500 to 357,500.

The report runs counter to several weeks of signals that economic activity softened in March and early April, phenomenon economists have dubbed the spring swoon because it also happened in the previous two years. Nonetheless, the data eased concerns of a deterioration in labor market conditions after nonfarm payrolls posted their smallest increase in nine months in March.

Nonetheless, claims have been difficult to adjust for seasonal swings in recent weeks because of the Easter holiday and spring breaks that are staggered across the nation's schools, so analysts were cautious about too firm a conclusion about what the data might signal.

Labor Department analysts said there was nothing unusual in the data and no states had estimated their claims, but the data were still affected by holidays in some regions. At the same time, the report did assist in pushing share prices higher.

Yields on Treasury securities also rose, with the Street preparing for an upcoming $29 billion auction of seven-year notes. The dollar weakened against the euro and the yen, with traders citing a recent slew of soft economic data that has raised concerns about the pace of the U.S. economic recovery.

While data for January and February suggested that growth accelerated in the first quarter, the economy appeared to have hit a speed bump at the end of the quarter. Data ranging from employment to retail sales and manufacturing weakened significantly in March, and factories appear to have continued to sputter in April.

Even the housing market, until recently a bright spot in the economy, has shown signs of slowing. Mortgage rates, however, have come close to record lows, leading to a spurt in mortgage applications in recent weeks. In the week through Thursday, the average interest rate on 30-year fixed rate mortgages hit 3.4 percent, the lowest since January and near the lowest on record, mortgage finance firm Freddie Mac said.

Analysts had expected 351,000 new jobless claims last week. The prior week's number was revised to show 3,000 more applications than previously reported.

Economists expect the government next week will report that employers hired 145,000 people in April. Employers added only 88,000 workers to their payrolls last month after a solid 268,000 increase in February.

The slowdown has been blamed on government belt-tightening, although analysts also think a mild winter followed by an unusually cold March may have led some employers and consumers to bring forward hiring and purchases.