This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The Dow and the S&P 500 were both trading above their all-time closing highs by early afternoon in New York, the rally being sparked by comments made by Fed Chairman Ben Bernanke after the stock market had shut yesterday re-affirming that monetary policy will remain accommodative ‘for the foreseeable future’.
The Dow rose 0.9% to 15,428 (above the record closing price of 15,409.39) and the S&P climbed 1.05% to 1669.9 (also above its record close which is 1669.16).
In a speech yesterday, Mr Bernanke said that the current unemployment rate of 7.6% ‘understates the weakness in the labour market.’ Combine that with the minutes from the last FOMC meeting, in which officials expressed a desire to see more evidence of recovery in the jobs market, along with this morning’s disappointing jobless claims data, and to me is spells out that the Fed’s stimulus will not be reduced anytime soon (barring a spectacular rate of improvement in employment numbers).
Initial jobless claims unexpectedly rose to a two-month high of 360,000 last week, data from the US Labor Department showed. Although the number is seasonally-adjusted, seasonal factors can still come into play, as factory shutdowns for the summer do not stick to a fixed schedule. Even so, the surprisingly large number does not bode well for the jobs outlook.
A report issued at the same time as the jobless claims data showed falling import and export prices. Total export prices were down 0.1% in June, while import prices dropped 0.2%. This further underlines the fact that downward pressure on inflation is more of a concern at the moment than upward pressure, which was one of the issues focussed on by at least one official at the Fed according to the minutes of the last FOMC meeting. We have more inflation data tomorrow with the Producer Price Index.