Stock futures rise, try to build on late-day surge
June 3, 2010 New data showed initial claims for jobless benefits dipped last
week, while private employers added workers last month. A third
report said productivity rose in the first quarter, though gains
were revised lower from a previous estimate.
Reports on the service sector and factory orders due out later
Thursday are also expected to show the economy is getting stronger.
Investors are trying to build on a late-day rally that sent the
Dow Jones industrial average up 225 points Wednesday. It was the
second straight day traders made big moves in the waning moments of
trading. On Tuesday there was a steep sell-off just before the
close.
Overseas markets rose Thursday following Wall Street's lead in
the previous session.
Ahead of the opening bell, Dow Jones industrial average futures
rose 47, or 0.5 percent, to 10,279. Standard & Poor's 500 index
futures climbed 5.90, or 0.5 percent, to 1,102.60, while Nasdaq 100
index futures rose 3.75, or 0.2 percent, to 1,882.75.
Fewer workers were laid off last week. Initial claims for
unemployment benefits fell by 10,000 to a seasonally adjusted
453,000. That is just shy of the 450,000 forecast by economists
polled by Thomson Reuters.
It was the second straight weekly decline in claims. But claims
still remain above the level that economists say would indicate
sustained jobs growth. High unemployment remains a key obstacle for
a strong recovery. Upcoming jobs reports are expected to show some
continued improvement.
Payroll company ADP said private employers added 55,000 jobs in
May. That's just shy of the 60,000 forecast by economists.
However, ADP revised its April data, saying employers actually
added 65,000 jobs during that month. That's more than double the
previous estimate that 32,000 jobs were created. The big revision
has helped to stem any disappointment over the worse-than-expected
May figures.
The ADP report comes a day ahead of the Labor Department's key
jobs data. ADP data is often considered a barometer for the
strength of the government's report. However, Friday's jobs report
provides a fuller picture because it also includes public sector
employment.
Economists forecast 513,000 jobs were added in May, compared
with 290,000 added a month earlier. It would be the biggest jump in
26 years, but as many as 300,000 of the workers hired in May are
expected to be temporary positions to help conduct the U.S. census.
Hiring has not picked up on a sustained basis, in part, because
companies are finding ways to become more efficient. Productivity
grew at an annual pace of 2.8 percent during the first quarter.
That's below the previous estimate of 3.6 percent, but still
indicates companies' output is growth for every hour worked.
Productivity jumped 3.7 percent during 2009, which was the
fastest growth in seven years.
Analysts say that eventually employers can no longer wring out
more productivity from current staff and have to start hiring new
workers. That was seen in the ADP report and insight into whether
there is likely to be more hiring in the coming months could from a
key report about the service sector.
The Institute for Supply Management's service sector index
likely crept higher to 55.5 in May from 55.4 a month earlier,
according to economists polled by Thomson Reuters. It would mark
the fifth consecutive monthly gain.
Any reading above 50 indicates growth.
The report, due out at 10 a.m. EDT, is considered a key gauge
for the health of the jobs market because the service sector
accounts for 80 percent of all workers outside of farmers.
A recovery in the service sector has been a bit slower than
manufacturing, so continued signs of improvement should provide
investors with confidence that the economy is strengthening.
While the service sector slowly recovers, manufacturing
continues to show some of the most consistent growth coming out of
the recession.
Economists forecast factory orders rose 1.8 percent in April
after climbing 1.1 percent in March.
There is some trepidation that the manufacturing sector could
face a slowdown because of the rising dollar and a potential
slowdown in Europe's economy. A stronger dollar makes it more
expensive to sell U.S.-produced goods overseas. Also, demand could
drop in Europe where countries like Greece, Spain and Portugal are
wrestling with mounting debt problems.
The euro remained above a four-year low it hit on Tuesday. The
euro, which has become an indicator for confidence in Europe's
economy, was flat at $1.2254. It has been trading in a tight range
throughout the day.
With investors moving into riskier assets, bond prices fell. The
yield on the benchmark 10-year Treasury note, which moves opposite
its price, rose to 3.42 percent from 3.35 percent late Wednesday.
Oil prices rose, while gold dipped.
Overseas, Britain's FTSE 100 gained 1.6 percent, Germany's DAX
index rose 1.6 percent, and France's CAC-40 climbed 2.2 percent.
Japan's Nikkei stock average rose 3.2 percent.