A report suggesting that unemployment levels might be stabilising helped reassure Wall Street today and sent stocks moderately higher, although the gains were limited by news of a sluggish gross domestic product.
Analysts said much of the advance was also a bounceback from yesterday’s sharp decline after the Federal Reserve voted to cut interest rates by a quarter-percentage point. Since the reduction was widely expected, traders were now making up for yesterday’s overreaction.
“It’s a direction-less day in the aftermath of the Fed cut,” said Michael Palazzi, managing director of equity trading at SG Cowen Securities. “Investors are looking forward to the end of the quarter and dreading the preannouncement season,” when companies issue earnings warnings.
The Dow Jones industrial average closed up 67.51, or 0.8%, at 9,079.04, having fallen 98 points yesterday.
The broader market also finished higher. The Nasdaq composite index advanced 31.35, or 2%, to 1,634.01. The Standard & Poor’s 500 index rose 10.49, or 1.1%, to 985.81.
The Commerce Department reported that the GDP rose at an annual rate of 1.4% during the first quarter. That was lower than the 1.9% reading estimated a month ago.
But the Labour Department said new claims for unemployment benefits fell last week by a seasonally adjusted 22,000 to a three-month low of 404,000, suggesting that layoffs may be stabilising.
“They were sort of in line as expected,” Palazzi said. ”The market is gingerly moving along with healthy scepticism. ... We’ve had such great gains, there’s more than a bit of caution.”
Stephen Massocca, president of Pacific Growth Equities, agreed.
“Had those reports delineated a clear direction for the economy it would have been meaningful” for the markets, he said. “But it didn’t really. ... The big new items the market is waiting to hear about are how poorly or well companies did in the second quarter. That will begin in earnest after the July 4 holiday.”
Gainers included Intel, which rose 59 cents to 20.63, and IBM, which advanced 1.86 to 84.35.
American International Group rose 55 cents to 56.20 after the company said it would buy General Electric’s Japanese insurance operations as well as its U.S. auto and home business for about 2.15 billion. GE gained 8 cents to 29.15.
Decliners included GlaxoSmithKline, which fell 4 cents to 41.35, although the British pharmaceutical company said it received an approval letter from the Food and Drug Administration for its antidepressant drug Wellbutrin.
Advancing issues outnumbered decliners 9 to 5 on the New York Stock Exchange. Volume was moderate.
The Russell 2000 index, which tracks smaller company stocks, rose 6.70, or 1.5%, to 449.91.