A drop in initial jobless claims helped Wall Street open higher this afternoon, but a degree of caution still remains as investors focused on the four-week moving average which showed jobless claims rising.
The number of US citizens claiming first-time unemployment benefits fell in the last week, much to the relief of investors. Initial jobless claims declined by 31,000 to 473,000 in the last week, which was a larger reduction in claims than economists had forecast. The number of Americans continuing to receive unemployment benefits unexpectedly fell to 4.46 million for the week ending 14 August.
While the drop in jobless claims was viewed as a positive and helped Wall Street open higher, equity markets remained wary as the four-week moving average of initial jobless claims actually rose by 3250 to 486,750. The four-week moving average helps remove volatility in the weekly jobless numbers, and the fact that this number is now at a nine-month high was a major concern for investors and limited the gains on Wall Street.
Attention will now turn to the Kansas City Federal Reserve bank conference tomorrow, where Fed Chairman Ben Bernanke is expected to make a speech to start the proceedings. With deflation now considered a threat to the US and unemployment unchanged at 10%, many are suggesting that the Fed may need to implement further policy if it is to meet its mandate of stabilising prices and achieving maximum employment. Investors will be looking for clues within his address that any such policy may be on the horizon.
By 4pm (London time) the Dow Jones Industrial Average added 15.66 points (+0.16%) to reach 10075.72. The broader S&P 500 rose 3 points (+0.28%) to 1058.33, while the tech-heavy Nasdaq 100 fell 1.43 points (-0.08%) to 1789.45.
The bidding continued for data storage specialist 3PAR this afternoon, with Dell upping its offer to $24.30 a share. On Monday HP outbid Dell's original offer of $18 by offering $24 for every 3PAR share, and speculation that Dell would come back with a higher offer sent shares in 3PAR as high as $27.49 earlier in the week. Following today's offer, 3PAR shares have retreated 2.4% to $26.12, which suggests investors still see another counter-offer from HP on the cards. An agreement between 3PAR and Dell, called perpetual matching rights, allows Dell to match any counter-offer within three days. As a result, Dell is unlikely to raise any offers significantly.
Industrial heavyweights were among the best performers on the Dow Jones, with Boeing, General Electric and Caterpillar rising 2.57%, 1.65% and 1.34% respectively. The financial sector also performed well today, buoyed by the better-than-expected results from France's Credit Agricole this morning. Bank of America rose 1.66%, Citigroup added 1.49% and Wells Fargo advanced 1.95%.
Commodity prices saw a strong rebound today with copper jumping 2.37% to $3.2890 a pound, while Brent crude oil rose 1.88% to $74.90 a barrel. Gold slipped following the release of the US jobless figures, down 0.2% to $1,237.70 an ounce.
In foreign exchange, the US dollar was broadly lower, losing around 0.7% against the euro and sterling. Improved risk sentiment following the drop in US jobless claims saw investors sell the US dollar. EUR/USD rose to $1.2745 while GBP/USD was trading at $1.5578. USD/JPY was little changed today at 84.60 as speculation continues over whether the Bank of Japan will intervene to stem the yen's rise. The Aussie dollar also found support from bargain hunters, rising 0.57% to $0.8890 against the US dollar.
