Stocks rebound from six-week low

August 22, 2013

U.S. stocks rebounded Thursday from a six-week low as better-than-expected economic data in the United States and abroad boosted confidence in the strength of the global recovery.

Global manufacturing data improved and home prices in the United States rose, while the U.S. labor market showed signs of strengthening.

Despite a technical error that halted trading on the Nasdaq composite index for three hours, U.S. stocks closed in positive territory Thursday. The Standard & Poor’s 500-stock index gained 0.86 percent to close at 1,656, while the Dow Jones industrial average rose 0.44 percent, to 14,964. The Nasdaq closed 1.08 percent higher at 3,638.

In the United States, the four-week rolling average of the number of people seeking unemployment benefits fell to about 330,500 — the smallest number since November 2007, according to the Labor Department. Claims last week totaled 336,000, up 13,000 from the week before, but the four-week average is considered a better indicator of trends.

Also, a report Thursday showed home prices rose 7.2 percent in the second quarter, compared with the same period last year, and were up 2.1 percent from the previous quarter, according to the Federal Housing Finance Agency’s House Price Index. It was the eighth consecutive quarterly price increase in the purchase-only, seasonally adjusted index.


“The housing market experienced one of its strongest quarters since the boom in the middle of the last decade,” said Andrew Leventis, FHFA’s principal economist.

The index rose in 47 states and in the District during the second quarter. The strongest annual appreciation occurred in Nevada, California, Arizona, Oregon and the District. D.C. prices rose almost 13 percent on a yearly basis, and 2 percent on a quarterly one.

As sales accelerated, mortgage rates jumped to a two-year high, increasing borrowing costs for home buyers. The average rate for a 30-year fixed mortgage rose to 4.58 percent from 4.40 percent a week ago, Freddie Mac said Thursday. The new figure is the highest since July 2011.

Mortgage rates have been climbing since early May as the Federal Reserve signals it may begin scaling back its bond-buying program aimed at lowering borrowing costs.

Overseas reports also were positive. An index measuring activity in the euro zone’s manufacturing and services sectors reached a 26-month high. In Germany, output rose at the fastest rate since January, rising from 52.1 in July to 53.4 this month. Germany’s manufacturing output reached a 25-month high.

New export orders rose in both Germany and France, and even the rest of the euro zone saw an increase of output for the first time since May 2011. According to a note by Markit’s chief economist, Chris Williamson, “the third quarter is shaping up to be the best that the euro area has seen in terms of business growth since the spring of 2011.”

In China, the HSBC Purchasing Managers Index hit a four-month high, rising to 50.1 from 47.7 in July.

Positive economic data from the United States and abroad are helping alleviate concerns about the way the Federal Reserve might go about scaling back its stimulus measures, said Jason Benowitz, a portfolio manager at Roosevelt Investments. The market fears a “hard tapering” scenario under which the Fed would cut its monthly $85 billion bond purchases by $20 billion a month this fall, he said.

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