Stocks close higher after a week of losses, S&P 500 at five-year high

by Adam Shell, USA TODAY
Updated 1h 21m ago

NEW YORK -- Stocks closed higher Thursday, Wall Street's first gain of the week, after a report showing unemployment claims fell to their lowest level in two months.

The Dow Jones industrial average closed up 72.07 points, or 0.5%, to 13,488.58. The broader Standard & Poor's 500 index ended up 13.79 points, or 1%, to 1,447.11, its highest level since early 2009. The Nasdaq composite index finished the day up 41.51 points, or 1.3%, to 3,135.21.

Before today, the S&P had fallen five trading days in a row, its longest losing streak since July. Energy stocks and banks gained the most, while utility stocks, which tend to do well when investors are fearful, fell before reversing course in afternoon trading.

Market gains worldwide started earlier, in Asia, helped by expectations that the People's Bank of China will soon take more steps to ease a slowdown in the world's No. 2 economy.

In the U.S., investors grappled Thursday with mixed economic data:
--The economy grew at an annual rate of 1.3% from April through June, the government said, slower than the previous estimate of 1.7% and not nearly fast enough to reduce unemployment.

-- Demand for long-lasting manufactured goods plunged in August by the most since January 2009. That was mostly because of a huge drop in commercial aircraft orders, which are volatile. Orders that reflect business investment rose 1.1% after two months of sharp declines.
-- The number of Americans seeking unemployment benefits fell 26,000 last week to 359,000, the lowest figure in nine weeks. A figure consistently below 375,000 is generally enough to lower the unemployment rate. The four-week moving average, a more reliable measure, dropped 16,000 to 374,000 for the week ended Sept. 22.
--Pending home sales in August fell 2.6% in August after hitting a two-year high in July, the National Association of Realtors said. In a separate report, mortgage buyer Freddie Mac, said the average 30-year fixed mortgage rate fell to 3.4%, down from 3.49% a week earlier and the lowest level on record.

In Europe, stocks came back from one of their worst days in months. T
he CAC 40 benchmark stock index closed up 0.7% to 3,439.32 in France. In Germany, the DAX 30 index finished up 0.2% to 7,290.02. And in Britain, the benchmark FTSE 100 index ended the day up 0.2% to 5,779.42.

In Spain, the benchmark IBEX 35 slipped 0.1% to 7,846.80. And borrowing costs for financially troubled Spain edged down, a positive sign.

In the U.S., demand for government bonds fell, generally an indication that investors are more willing to embrace risk. The yield on the 10-year note, which moves opposite the price, rose 0.03 percentage point to 1.64%.

The price of crude oil rose $2.20, or 2.4%, to close at $92.18 per barrel as concerns mounted about a potential military confrontation over Iran's nuclear program. Oil had dropped $9 a barrel the past two weeks.

The price of gold jumped $26.50 to end trading at $1,780.10. The dollar was flat against most major currencies.

Investors cheered the renewed efforts of Spain and Greece to implement harsh austerity measures necessary to quality for more financial aid from the European Central Bank.

And investors are hopeful the People's Bank of China will soon take more steps to counteract a slowdown in the world's No. 2 economy.

China got some negative news on Thursday, as its biggest steelmaker said it has shut down a mill because of weakening growth. While China's economy grew 7.6% in the three months ended in June, that's a sharp slowdown from a few years ago and is difficult for Chinese companies that rely on high growth to drive demand.

But worldwide, markets now expect the nation's central bank to step up efforts to stem the declines.In Europe, investors regained their footing after mass protests in Greece and Spain over upcoming austerity plans, although the small gains did not make up for Wednesday's big losses.

In Asia Thursday, helped by expectations the People's Bank of China will soon take more steps, Hong Kong's Hang Seng climbed more than 1.1% to 20,762.29 and mainland China's Shanghai Composite Index jumped 2.6% to 2,056.32. The smaller Shenzhen Composite Index also gained 2.6% to 837.96.Japan's Nikkei 225 rose about 0.5% to 8,949.87, a day before the release of industrial production and retail sales figures.
Despite investors' focus on China and Thursday's economic reports, what happens in debt-strapped Europe is again affecting Wall Street.

The market calm two months ago that followed European Central Bank President Mario Draghi's promise to do whatever it takes to save the eurozone has given way to a bearish flashback of TV images and financial headlines that have spooked markets on and off since 2010.
Images of social unrest in Madrid and Athens are making news as protestors rail against the economic squeeze caused by pension cuts and tax increases.

Charts that portray financial stress, such as rising yields on government bonds in indebted countries such as Spain, where borrowing costs jumped above 6% Wednesday, have reappeared on Wall Street. Warnings are again popping up in analyst reports with urgent headlines, such as "Crunch time for Spain."

While the re-emergence of Europe as a risk factor hasn't caused a major sell-off in U.S. stocks, "This week is a reminder that the process (of resolving eurozone issues) is sporadic, halting and sometimes violent," Andrew Busch, a public policy strategist at BMO Capital Markets noted in a report.

Stocks close higher after a week of losses, S&P 500 at five-year high