Stocks rise following drop in jobless claims

By TIM PARADIS and IEVA M. AUGSTUMS

posted: 29 MINUTES AGO

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NEW YORK -Stocks climbed Wednesday following a drop in weekly unemployment claims to the lowest level of the year and a rise in new home sales.

The market's gain was modest on thin trading volume ahead of the Thanksgiving holiday, which can exacerbate swings in the market.

The government said new claims for unemployment insurance fell by 35,000 last week to 466,000. That's the fewest claims since September last year, and better than the 500,000 that economists had expected.

The drop in claims suggests the job market is healing, but concern remains that the improvement will be temporary as the weak economy continues to push unemployment higher. The jobless rate hit 10.2 percent in October and many analysts believe it will keep rising before starting to improve next summer.

In other economic reports, new home sales rose 6.2 percent to an annual rate of 430,000. That's above what economists surveyed by Thomson Reuters had expected.

Separately, the government also reported consumer spending rose a brisk 0.7 percent last month, following a 0.6 percent drop in September. It was the best showing since August, when the government's now-defunct Cash for Clunkers programs enticed people to buy cars.

Not all the day's news was upbeat. Orders for expensive manufactured goods dropped 0.6 percent last month, the first drop since August. Economists had expected orders would grow.

Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, N.J., said investors are still worried about the sustainability of a recovery but are afraid of missing more of the market's eight-month rally.

"People may not believe in this market but they're reluctantly being pulled into it with each of these reports," he said.

In midafternoon trading, the Dow Jones industrial average rose 16.63, or 0.2 percent, to 10,450.34.

The broader Standard & Poor's 500 index rose 2.99, or 0.3 percent, to 1,108.64, and the Nasdaq composite index rose 5.88, or 0.3 percent, to 2,175.06.

The dollar fell against most other major currencies, while gold rose to another record.

A weakening dollar has bolstered commodities and stocks of energy and materials companies, helping pump up their stocks in the market's eight-month rally.

Bond prices were mixed. The benchmark 10-year Treasury note rose, pushing its yield down to 3.27 percent from 3.31 percent late Tuesday. The yield on the three-month T-bill rose to 0.05 percent from 0.03 percent.

The Chicago Board Options Exchange's Volatility Index, known as the market's fear index, fell to 20.05, its lowest level since August 2008. That's a signal that investors are less worried about big swings in the market.

In corporate news, Tiffany & Co. rose after its third-quarter profit topped expectations and the jeweler raised its full-year profit forecast ahead of the holiday shopping season. Tiffany rose $1.93, or 4.6 percent, to $43.76.

That lifted other luxury retailers. Saks Inc. rose 28 cents, or 4.4 percent, to $6.69, while Nordstrom Inc. rose $1.05, or 3.1 percent, to $34.73.

The reports came ahead of the unofficial start of the holiday shopping season on Friday. Investors will be looking for any signals in the coming weeks from retailers about consumer spending, which is the primary driver of the economy.

Deere and Co. posted a loss for its fiscal fourth quarter but the maker of farm equipment said it would have been profitable without big charges it booked during the latest period. The stock rose $1.44, or 2.8 percent, to $53.73.

Light, sweet crude rose $1.06 to $77.08 per barrel on the New York Mercantile Exchange.

More than two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 479.2 million shares compared with 544 million shares traded at the same point Monday.

Overseas, Japan's Nikkei stock average rose 0.4 percent. Britain's FTSE 100 rose 0.8 percent, Germany's DAX index rose 0.6 percent, and France's CAC-40 rose 0.7 percent.

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Augstums reported from Charlotte, N.C.

2009-11-25 15:33:30