News Column

Stocks May Extend Yesterday's Rally In Early Trading - US Commentary

May 22, 2014

WASHINGTON (Alliance News) - Following the strong upward move seen in the previous session, stocks may see some further upside in early trading on Thursday. The major index futures are currently pointing to a modestly higher open for the markets, with the Dow futures up by 12 points.

A better than expected report on Chinese manufacturing activity may help the markets to extend the rally that was seen on Wednesday.

The preliminary results of a manufacturing survey by Markit and HSBC showed that Chinese manufacturing activity continued to contract in May, albeit at a notably slower rate.

The headline manufacturing purchasing managers' index rose 1.6 points to 49.7 in May, reaching a five-month. Economists had expected a smaller improvement to 48.3.

Nonetheless, early buying interest may be subdued following the release of a report from the US Labor Department showing that initial jobless claims rebounded by more than anticipated in the week ended May 17th.

The report said jobless claims jumped to 326,000, an increase of 28,000 from the previous week's revised level of 298,000. Economists had been expecting jobless claims to climb to 310,000.

While the number for the previous week was upwardly revised from 297,000, it still represents the lowest number of claims in seven years.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "Last week's below 300,000 print turned out to be a one week wonder but the recent trend is encouraging in terms of the pace of firing's."

"It's not just Wall Street that is hoping for the sustainable 3% GDP growth in the 2nd half of 2014, corporate America is hopeful for the same and under that scenario the amount of firing's should still slow," he added.

Not long after the open, trading could be impacted by the release of a separate report from the National Association of Realtors on existing home sales in the month of April.

Economists expect existing home sales to climb to an annual rate of 4.69 million in April after edging down 0.2% to a rate of 4.59 million in March.

The Conference Board is also due to release its report on leading US economic indicators in the month of April. The leading economic index is expected to increase by about 0.4%.

In corporate news, shares of Best Buy (BBY) may be in focus after the consumer electronics retailer reported first quarter earnings that exceeded analyst estimates but on weaker than expected sales.

Department store operator Sears Holdings (SHLD) is likely come under pressure in early trading after reporting a wider than expected first quarter loss amid a drop in sales.

On the other hand, shares of Williams-Sonoma (WSM) are moving notably higher in pre-market trading after the home products retailer reported better than expected first quarter results and raised its full-year guidance.

After moving sharply lower over the course of the trading day on Tuesday, stocks showed a significant rebound during trading on Wednesday. The markets continued to perform well following the release of the minutes of the latest Federal Reserve meeting.

The major averages closed firmly in positive territory, near their best levels of the day. The Dow jumped 158.75 points or 1% to 16,533.06, the Nasdaq advanced 34.65 points or 0.9% to 4,131.54 and the S&P 500 climbed 15.20 points or 0.8% at 1,888.03.

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Source: Alliance News

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