News Column

Stocks May See Early Strength Following Mixed Data - US Commentary

May 29, 2014

WASHINGTON (Alliance News) - After coming under pressure late in the previous session, stocks may move back to the 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 23 points.

A report showing a bigger than expected drop in initial jobless claims may help push stocks higher, although a separate report showing a contraction in first quarter GDP is likely to limit any early strength on Wall Street.

The Labor Department recently released a report showing that initial jobless claims dropped to 300,000 in the week ended May 24th, a decrease of 27,000 from the previous week's revised level of 327,000.

Economists had been expecting jobless claims to dip to 317,000 from the 326,000 originally reported for the previous week.

On the other hand, the Commerce Department released revised data showing that GDP decreased by 1.0% in the first quarter compared to the initial estimate for a 0.1% uptick. The revised data had been expected to show a smaller contraction of about 0.5%.

The bigger than expected drop primarily reflected a downward revision to private inventory investment and an upward revision to imports, which are a subtraction in the calculation of GDP.

Paul Ashworth, Chief US Economist at Capital Economics, said, "The downward revision is almost entirely because inventories were a much bigger drag on growth than previously thought."

"But that bigger first-quarter drag means that we are likely to see a bigger bounce back in the second quarter," he added.

Not long after the open, the National Association of Realtors is scheduled to release a separate report on pending home sales in April. Economists expect pending home sales to increase by 1.0%.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

After showing a lack of direction throughout much of the session, stocks came under pressure in the latter part of the trading day on Wednesday and closed modestly lower. The pullback ended a four-day winning streak by the markets.

The major averages ended the day in negative territory but off their lows for the session. The Dow dipped 42.32 points or 0.3% to 16,633.18, the Nasdaq slid 11.99 points or 0.3% to 4,225.07 and the S&P 500 edged down 2.13 points or 0.1% to 1,909.78.

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Source: Alliance News

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