US stocks rebound despite poor job figures

Wall Street had a mild rebound after three losing sessions today, with investors sending stocks mostly higher despite a sharp rise in unemployment claims and mixed holiday retail sales.

Only the Nasdaq composite index posted a small loss.

Although stocks fluctuated, Wall Street greeted the Labour Department’s weekly first-time jobless claims report with surprising calm. Jobless claims rose to 364,000 last week, up from 321,000 the week before – the sharpest rise in nearly three years.

Whether today’s gains can set a new direction for short-term trading remains to be seen, as the Labour Department is tomorrow expected to release its monthly job creation report, a key barometer of the labour market and the nation’s economic health.

A lower-than-expected number following November’s lacklustre job growth could send stocks lower.

And combined with another rise in oil prices and news this week that the Federal Reserve sees the potential for worsening inflation, and, in turn, higher interest rates, investors had reason to be nervous.

“No matter how you look at it, this market is facing a headwind,” said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers in Boston. “With these job numbers the way they are and oil rising, and the Fed talking about inflation, you could potentially see a very muted economic recovery and much slimmer returns.”

The Dow Jones industrial average rose 25.05, or 0.24%, to close at 10,622.88.

Broader stock indicators were mixed. The Standard & Poor’s 500 index was up 4.15, or 0.35%, at 1,187.89, and the Nasdaq fell 1.24, or 0.06%, to 2,090.00.

Tomorrow’s job report will go a long way in determining whether the three previous sessions’ losses will be a short correction or a longer-term trend.

While some pullback was expected after the strong finish to 2004, the market was unnerved by the prospect of higher rates, and any attempts to resume Wall Street’s post-election rally have met with strong resistance.

“I think investors are definitely waiting to see what the jobs report looks like, and then on Monday we’re already into earnings season,” said Jeff Kleintop, chief investment strategist for PNC Financial Services Group in Philadelphia. “There’s a lot of wait-and-see going on with regards to jobs, earnings, the dollar, oil prices – you name it.”

Crude oil futures rose sharply, surging past the 45-per-barrel mark, one day after the Energy Department reported strong inventories of distillate fuels but a decline in crude reserves.

A barrel of light crude was quoted at 45.56, up 2.17, on the New York Mercantile Exchange.

Investors kept a close eye on the retail sector as companies issued their sales reports from a mediocre holiday season.

Dow component Wal-Mart was up 76 cents at 54.05 after it confirmed that same-store sales – sales from stores open at least a year – rose 3 % from a year ago.

Federated Department Stores saw same-store sales rise 2.3% in December, while rival JC Penney & Co said its sales fell 1.2%, less than Wall Street had forecast. Federated slipped 2 cents to 57.20, while JC Penney fell 2 cents to 40.78.

Three retailers reduced their fourth-quarter profit forecasts after seeing sales slump over the holidays.

Home decor outlet Pier 1 Imports fell 39 cents to 18.36, teen accessory retailer Claire’s Stores lost 57 cents to 20.10, and Lane Bryant and Fashion Bug parent Charming Shoppes skidded 94 cents to 8.30.

National Semiconductor said it would cut 550 jobs as it streamlines its manufacturing operations, resulting in one-time charges of up to 26 million in severance and expenses.

The chip maker was also upgraded to “neutral” from “underperform” by Credit Suisse First Boston. National Semi gained 19 cents to 17.07.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume was moderate.

The Russell 2000 index of smaller companies was up 2.34, or 0.38%, at 619.82.