Wall Street opened higher today following a drop in initial jobless claims and an expansion in manufacturing activity.
It has been quite an interesting day, with manufacturing data released in the US, UK, Europe and Asia bolstering confidence in the global economy and propping up earnings expectations.
In the US, the Labour Department showed some more signs of life returning to its embattled labour market, with the number of Americans filing for first-time unemployment benefits (initial jobless claims) dropping by 6,000 to a seasonally adjusted 439,000 last week, roughly in line with expectations. In addition, the four-week moving average for initial jobless claims, a more accurate barometer, fell by 6,750 to 447,250, the lowest since September 2008.
As a matter of fact, global outplacement consultancy firm Challenger, Gray & Christmas Inc said the number of planned layoffs at US firms fell sharply below last year's comparative levels in the first quarter of this year, despite a sharp rise in planned job cuts last month.
According to the Challenger report, US employers announced 67,611 planned job cuts in March, up nearly 61% from 42,090 the month before. However, the overall picture for the first-quarter was much better, with a total of 181,183 planned layoffs announced, down 69% from the 578,510 in the first quarter of 2009.
The manufacturing data is what's really driving Wall Street today, however. Data released today showed that US manufacturing activity in March expanded at the fastest pace since July 2004!
The Institute of Supply Management's (ISM) factory index climbed to 59.6 last month, exceeding the 57-median forecast shown in a Bloomberg survey. Meanwhile, the inventory index rose to 55.3 from 47.3, suggesting manufacturers are starting to build inventories – a good sign because it suggests the sector is anticipating greater demand.
'Manufacturing will keep growing at a pretty brisk pace,' said Ken Mayland of ClearView Economics. 'Exports will be a real driver, and we're going to see inventory rebuilding. The job market is on the cusp of a rebound that will make this recovery more sustainable.'
But the US wasn't alone; there has also been an influx of positive manufacturing data from China, the UK and Europe today.
China’s Purchasing Manager's Index (PMI) for the manufacturing sector rose to a seasonally adjusted 55.1 in March from 52 the prior month, indicating the expansion in the country's manufacturing sector has accelerated.
Meanwhile, data from the Bank of Japan indicated that confidence among the country's largest manufacturers rose for a fourth straight quarter, while a separate report showed South Korea's exports rising more than anticipated.
And in the UK, data released earlier today indicated that manufacturing activity grew at its fastest pace in 15 years! The PMI for the UK manufacturing sector rose to 57.2 in March from 56.5 the prior month while a separate report showed euro zone PMI manufacturing rising to 56.6 in March from 54.2 the month before.
The positive manufacturing data suggests that global economic growth is accelerating, which should eventually translate into increased hiring and stronger demand for commodities.
Unsurprisingly, US resource stocks fared exceptionally well today, with the likes of Freeport-McMoRan Copper & Gold, Newmont Mining, Southern Copper and Barrick Gold up between 2% and 4% this afternoon. Energy majors strengthened as well, after crude oil powered toward $85 a barrel. Chevron shares climbed 1.1% to $76.65 while Exxon gained 0.9% to $67.59.
Banks were also in demand, with the likes of Citigroup, Bank of America and Wells Fargo up between 0.3% and 1.5%.
By 3:50pm (London time), the Dow Jones Industrial Average was trading 66.51 points (+0.61%) above its previous close at 10923.14, while the broader S&P 500 was 8.47 points (+0.72%) higher at 1177.90.
Looking ahead, all major stock indices in the UK, Europe and the US are closed for the Good Friday holiday tomorrow, meaning the currency market will be the first to react to the American labour market reports, particularly the nonfarm payroll figure due at 1:30pm (London time).
According to a Bloomberg survey, tomorrow's nonfarm payroll figure is expected to show the US economy adding 184,000 jobs, in part due to better weather conditions and temporary hiring by the US government to conduct the 2010 census.
However, beware, as a worse-than-expected payroll figure number may shake sentiment. I must say that this has to be one of the most unloved bull markets ever and it may not come as a surprise to see the media inundated with speculation about China and India overheating. Expect some caution to kick in toward the end of the US session today.
While those assertions may be true to some extent, the media has a way of embellishing things in order to attract attention. We must not discount the fact that advanced economies are also recovering, albeit at an slow pace, and that this may, if you like, hedge or mitigate the impact of monetary tightening in Asia and keep overall global economic growth on the uptrend.
