Stocks put together a fairly strong rebound Thursday. Financials spurred the advance as investors bought into the idea that the government's forthcoming plan to shore-up banks could provide an impetus for a rally.
Financials were down as much as 4.7% in the early going, but managed to climb to a gain of 4.1% after analysts at UBS stated that bank bailout news could induce sizable rallies. Senate Banking Chairman Dodd told reporters it might be possible to modify its mark-to-market rules, which would be a boost to banks hurt by write-downs. Financials finished the session 1.4% higher.
Reuters cited a Treasury official when it reported Treasury Secretary Geithner is expected to unveil a comprehensive financial framework plan Monday. With the government progressing toward a comprehensive plan to help restore the financial system, investors were willing to look past mixed earnings and economic data that had actually put stocks under pressure in the early going.
Cisco (CSCO 16.35, +0.51) topped quarterly earnings expectations, but disappointed investors when it issued downside revenue guidance. Cisco was able to rebound with the help of other large-cap tech stocks. Large-cap tech led the Nasdaq in outperforming the other headline indices.
Visa (V 53.74, +4.61) and MasterCard (MA 159.84, +19.69) both announced better-than-expected quarterly earnings and optimistic forecasts. However, analysts question whether they card companies can continue growing their earnings at rapid rates amid a pullback in consumer activity.
Softer consumer spending prompted numerous retailers to issue cautious forecasts amid lower January same-store sales. However, many retailers' comparables were not as bad as feared, which induced gains in the group. The S&P 500 Retail Index finished 3.3% higher.
Weekly initial jobless claims were up for the fourth straight week, this time climbing 35,000 to 626,000 for the week ending Jan. 31. The number exceeded the 580,000 claims that were expected, and was the highest level since 1982. The shock from such heightened claims is tempered by the knowledge that the workforce has grown in recent decades. For that reason, some economists do not believe the unemployment rate will break into the double digits -- the government's official jobs report is due ahead of Friday's opening bell.
The drop in employment actually helped inflate fourth quarter productivity. Since hours worked has fallen at a faster clip than economic output, fourth quarter productivity increased 3.2%. An increase of 1.5% was expected. Meanwhile, soft economic conditions are undercutting inflationary pressures. Fourth quarter unit labor costs increased 1.8%, which is less than the consensus forecast of a 2.8% increase.
Trading volume hit a two-week high this session, exceeding 1.6 billion shares on the New York Stock Exchange. All 10 of the S&P 500 sectors finished higher.
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