MarketView for November 25

Summary

Share prices were higher on Wednesday and the three major equity indexes all managed to close out the day in positive territory despite volume being anemic. Trading volume was among the lightest of the year one day before the Thanksgiving holiday, with many employees absent from the trading floors. Even so, the Dow industrials and the S&P 500 edged to fresh 13-month highs.

Natural resource stocks received support from the weak dollar, which fell to a 15-month low against a basket of currencies, partly because the better-than-expected economic data encouraged investment in assets providing greater returns. Specifically, new claims for jobless benefits fell sharply in the latest week, while sales of new single-family homes rose in October to their highest level in a year.

The financial markets will be closed on Thursday to mark Thanksgiving. On Friday, trading resumes, but the stock market will close early at 1 p.m.

Gold stocks were having a big day as the price of gold broke another record above $1,180 an ounce. Newmont Mining rose 2.9 percent to $54.90. Shares of energy companies rose as the front-month oil futures climbed $1.94, or 2.6 percent, to settle at $77.96 per barrel. Marathon Oil added 1.6 percent to $33.53.

On the earnings front, Tiffany closed up 4.9 percent at $43.89 after the luxury retailer reported third-quarter earnings that beat expectations and raised its full-year earnings outlook.

Deere saw its shares chalk up a gain of 2.7 percent to $53.70. The world's largest maker of tractors and harvesters reported a quarterly net loss on Wednesday on weak equipment sales and a series of one-time charges. However, the results, excluding special items, came in better than expected.

The Chicago Board Options Exchange Volatility Index .VIX, or the VIX, a favorite barometer of investor sentiment, sank to its lowest level in 15 months, falling as low as 20.05 during the session. The VIX ended on Wednesday at 20.48, up just 0.05 percent.

Consumer spending increased more than expected in October, while a final reading of consumer sentiment was revised up slightly in November, but was still down from October's reading, according to the Reuters/University of Michigan survey.

The positive economic data offset a report on new durable goods orders,  which unexpectedly fell in October, weighing on stocks in early trading.

Some Economic Data Looks Pretty Good

Consumer spending and home sales rose more than expected in October, while new claims for jobless benefits fell sharply last week, suggesting the economic recovery was gaining traction. A surprise decline in durable goods orders a second straight monthly drop in consumer confidence, however, offered a reminder that the recovery from the most brutal recession in 70 years would be gradual.

The Commerce Department reported on Wednesday that consumer spending, which normally accounts for over two-thirds of all economic activity, increased 0.7 percent last month after falling 0.6 percent in September.

Separately, the Labor Department reported that initial claims for state unemployment benefits slid to 466,000 last week, the lowest in more than a year, from 501,000 the prior week. It was the fourth straight weekly decline and the first time since January that claims dipped below 500,000.

Another Commerce Department report showed sales of newly built single-family homes rose 6.2 percent to a one-year high last month. Sales hit a 430,000 unit annual pace, up from 405,000 in September and beating expectations for a 410,000 unit pace. The rise in housing sales pushed the supply of new homes on the market down to 239,000 units, the lowest level since May 1971.

Home sales have been driven higher by buyers trying to take advantage of the tax credit for first-time homeowners, which had been scheduled to expire on November 30 but has since been extended into next year. Falling house prices and low mortgage rate are also contributing to the recovery in the housing market, whose collapse was the main trigger of the U.S. recession.

Hopefully stability in the housing market will help to improve the psychology of households, shattered by the highest unemployment level in 26-1/2 years, but confidence remained shaky this month. The Reuters/University of Michigan Surveys of Consumers' final index of consumer sentiment in November came in at 67.4, down from October's 70.6 but up from an initial 66.0

And a 0.6 percent drop last month in orders for durable goods, which include products such as refrigerators and computers meant to last at least three years, raised fears that the manufacturing sector's recovery was faltering. Orders increased 2 percent in September. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 2.9 percent last month after rising by a hefty 2.6 percent in September.