MarketView for December 26

Summary

Stocks rose on Thursday, with Wall Street continuing its record-setting advance after the Labor Department reported that initial claims for unemployment insurance fell by 42,000 claims last week, dropping to 338,000, reaching the lowest level in nearly a month.

Retail stocks stayed in the spotlight as the holiday shopping season drew to a close. Data published by MasterCard Advisors SpendingPulse said sales between November 1 and December 24 rose 2.3 percent, bucking concerns that the season had been weak.

The stock of Urban Outfitters was up 2.2 percent, closing at $37.55 and was one of the S&P 500's largest percentage gainers. Amazon.com gained 1.3 percent to close at $404.39, while Wal-Mart added 0.5 percent to end the day at $78.39.

The Dow Jones Industrial Average rose to a record closing high for the sixth straight session, the longest winning streak for the blue-chip average since March. The S&P 500 scored its fourth record closing high in a row. The Dow climbed to an all-time intraday high of 16,483, while the S&P 500 hit a record intraday high of 1,842.84.

The S&P 500 is up 29.2 percent this year, is large part because of the Fed addition of liquidity to the markets. The index is on track for its best year since 1997. The Dow has gained 25.8 percent in 2013 while the Nasdaq has jumped 38 percent. Of the 249 trading sessions completed in 2013, the Dow industrials have closed at an all-time high 50 times, while the S&P 500 has finished at a record high 44 times. The Nasdaq also rose, touching its highest level since Sept. 1, 2000.

Energy stocks did their part with Exxon Mobil ending the day up 1.7 percent at $100.90, which helped boost the Dow, while Chevron chalked up a gain of 1.1 percent to close at $124.81.

In another black eye for the retail industry, the hackers who attacked Target also managed to steal encrypted personal identification numbers. Nonetheless, Target's shares were up 1.3 percent to end the day at $62.48, though it remained down 1.7 percent from its close on December 18.

There is a rumor on the Street that SoftBank is in talks to buy T-Mobile. Shares of T-Mobile hit their highest level since 2007, gaining 2.3 percent to close at $32.93, just off an intraday high of $32.95.

Shares of Amazon.com, UPS and FedEX were higher after Amazon offered to refund shipping charges after the package-delivery companies said they did not deliver some packages by Christmas amid overwhelming volume.

Tesla Motors rallied 3.1 percent after a China Daily report said the maker of electric cars would look to launch additional showrooms in China in 2014.

After briefly surpassing 3 percent, the yield on the 10-year Treasury note ended the day up 1 basis point at 2.99 percent. The dollar held steady against the currencies of major U.S. trading partners, while dollar-denominated commodities gained, with crude futures adding 33 cents to $99.55 a barrel, while gold futures rose $9.00 to $1,212.30 an ounce.

Volume, though, was light in the first full day of trading since Monday. Markets were closed on Wednesday for Christmas Day. Trading ended early on Tuesday. According to data from BATS Global Markets, approximately 3.3 billion shares changed hands on the major equity exchanges, well below the 6.2 billion share average so far this month.

Unemployment Claims Improve

The number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly a month, a hopeful sign for the labor market, while holiday retail sales rose in November and December.

Initial claims for state unemployment benefits decreased 42,000 to a seasonally adjusted 338,000, the Labor Department said on Thursday.

While the holiday season has made recent claims data so volatile it has been difficult to interpret, Thursday's report showed claims continue in a range that supports expectations for faster economic growth next year.

New claims have trended higher since September. Economists, however, say the level of claims is still consistent with job growth, and other labor market indicators have pointed to a strengthening labor market. The four-week moving average for new claims, which irons out week-to-week volatility, increased 4,250 to 348,000.

Stronger consumer spending appeared to push the economy to accelerate in the second half of the year and it is likely the momentum will carry over into 2014.

The holiday season has also shown positive signs, with sales growing from a year earlier as retailers used deeper discounts and promotions to attract customers, according to data from MasterCard Advisors.

Citing an improving labor market, the Federal Reserve earlier this month announced it would reduce its monthly $85 billion bond buying program by $10 billion starting in January.

Payrolls increased solidly in October and November. The unemployment rate dropped to a five-year low of 7.0 percent in November.

A Labor Department analyst said no states had submitted partial or estimated date. But he noted that claims were still in a period of volatility related to the holidays. The volatility is caused by the difficulty inherent in adjusting weekly data for seasonal factors like retailers and schools adjusting the sizes of their staff for the winter season.

Claims for the prior week were revised to show 1,000 more applications received than previously reported. The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 46,000 to 2.923 million in the week ended December 14.

Holiday Sales A Surprise

Holiday sales were higher than a year earlier as retailers used higher discounts and promotions to attract customers in a season with fewer shopping days, according to MasterCard Advisors. Between November 1 and December 24, sales rose 2.3 percent, compared with 0.7 percent a year earlier, data published according to the MasterCard Advisors' SpendingPulse report.

SpendingPulse tracks customer spending on apparel, electronics, jewelry, luxury and home furniture & furnishings categories during the holiday season.

For retailers the 2013 holiday season was probably the most competitive since the recession in 2008, as consumers battled stagnant wages and higher taxes. So it was no surprise that retailers were forced to reduce prices along with other promotions to lure customers in a season that typically generates 30 percent of sales and 40 percent of profits.

Even though the 2013 holiday season had six fewer shopping days between Thanksgiving and Christmas, as well as bad weather that affected sales in some parts of the country, holiday sales were a clear improvement on 2012 numbers, although last year's sales were hurt by super storm Sandy, a mild weather that blunted sales of winter clothing and rising concern about the "fiscal cliff".

Total retail spending rose 3.5 percent, MasterCard Advisors said. Sales of apparel saw modest growth mainly due to children's clothing, while sales of men's and women's apparel fell. Luxury and electronic sales were flat while eCommerce sales showed low double-digit percentage growth, SpendingPulse data showed.

The National Retail Federation in October forecast sales for the months of November and December to marginally increase 3.9 percent to $602.1 billion, from 2012's actual 3.5 percent growth. SpendingPulse and the National Retail Federation look at different categories, which can cause some variation in their forecasts.

Overall Christmas Day online sales rose 16.5 percent from a year earlier, according to IBM Digital Analytics. As a result, the high volume of holiday packages overwhelmed UPS and Federal Express, delaying the arrival of Christmas presents around the globe.