Shares on Wall Street turned lower late on Thursday morning, despite signs that the US economy is shaking off the ill effects of this winter’s freezing weather.
By Peter Martin
Thursday, March 13, 2014
In a similar pattern to several other trading days this week, stock index benchmarks made gains early in the session, but these were erased before midday. By late morning in New York, the Dow Jones Industrial Average was down 0.29% or 47 points at 16,293 and the S&P 500 was 0.14% lower at 1866.1. Despite successive declines this week, stock market averages remain fairly close to all-time highs, painting a picture more of a period of consolidation than of overtly negative sentiment.
We had a batch of significant economic reports released before the market opened on Thursday morning, including retail sales and jobless claims, and there was cause for some cautious optimism to be found in the data. The number of claimants for first-time unemployment insurance shrank by 9000 last week to 315,000, a surprise result given a Reuters survey of analysts had pointed to a rise to 330,000. This pulls the four-week moving average down to 330,500, which compares very favourably to how things were looking this time last month. Combined with last Friday’s solid showing by the Labor Department’s monthly employment report, this will fuel hopes that the labor market is back on a path of improvement after a temporary weather-induced detour.
The same assessment could be applied to retail sales after February’s numbers showed a welcome improvement from January’s weakness. Sales grew 0.3% last month, bouncing back from a downwardly-revised 0.6% decline the month prior (originally reported as a 0.4% drop). This was a slightly better result than had been anticipated. Excluding the more volatile components of autos and gas, core sales still showed a 0.3% increase. There still remains a question mark over just how much drag the bad weather created for the economy, but the fact that indicators are showing an upturn in February from January suggests the recovery may have regained some momentum heading into spring.
February’s report on import and export prices shows things warming up at the headline level, but digging deeper into the data this may just be another transitory consequence of the weather. Export prices rose 0.6% last month after a 0.2% increase in January, while import prices jumped 0.9%. A substantial part of these upsurges is down to climbing fuel costs, which are likely weather-correlated. Stripping out fuel costs, import prices declined 0.2% month-on-month. So in spite of the sizeable headline price rises, there is no reason to conclude the inflation outlook is necessarily much changed.
In the forex market, the euro strengthened against the dollar on Thursday, climbing 0.2% to 1.3928 by late morning in New York, after earlier hitting a two-year high of 1.3967. The euro has climbed steadily since the ECB’s decision last week to take no action in easing further, gaining around 1.4% against the dollar since last Thursday.
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