Stocks gained despite GDP data from Europe came in below expectations, showing that the economic bloc continues to be mired in sluggish economic growth.
First, the scoreboard:
- Dow: 16,713.58, +61.8, (+0.4%)
- S&P 500: 1,955.18, +8.5, (+0.4%)
- Nasdaq: 4,453.00, +18.9, (+0.4%)
And now, the top stories of the day:
1. The weekly report on jobless claims showed claims climbed 21,000 from last week to 311,000. This was more than the 295,000 that had been expected by economists, and this report brings the four-week moving average of claims up slightly to 295,750. Following the report, TD Securities’ Millan Mulraine said, “This sharp rise in the level of initial claims is largely noise and is nothing more than a giveback from the surprising weakness in previous weeks — resulting from the lower than expected level of auto retooling shutdown.”
2. Overnight, we got second quarter GDP data from the Eurozone, which showed growth in the economic bloc was flat compared to the first quarter. “The poor figure is chiefly driven by downside surprises in Italy, France, and Germany, which all failed to grow in the second quarter,” noted Pantheon Macroeconomics’ Claus Vistesen. “On an annualized basis, eurozone growth is now running at a disappointing 0.4% in the first half of this year.” Following the report, the yield on the German 10-year bond fell below 1% for the first time in history.
3. Retail giant Wal-Mart reported second quarter earnings that missed expectations on comparable store sales that were flat compared to last year. The company also cut its full-year earnings outlook, saying that, “Our guidance includes incremental investments in e-commerce and headwinds from higher healthcare costs in the U.S. than previously estimated.” Following the report, BI’s Hayley Peterson highlighted the company’s major problem: its Supercenter stores.
4. Shares of two fast-casual restaurant chains, Red Robin and Noodles & Co., saw shares sell-off sharply after disappointing earnings reports. Red Robin fell more than 17% after reporting adjusted earnings that came in well below expectations, while profit margins were also leaner compared to last year. Noodles lost over 15% after earnings and revenue disappointed, as the company, which made its public debut in June of 2013, said it expects comparable-store sales in 2014 to be flat compared to the prior year.
5. The last two trading days saw stocks rally in what many are calling a “bad news is good news” trade, but in a post that appeared on BI on Thursday, former CEO of PIMCO Mohamed El-Erian wrote that this trend may be coming to an end. “This ‘bad news is good news’ strategy has worked well given the commitment of central banks to use asset markets as a way of attaining their economic objectives. But there is a limit to how long it can be divorced from the question of the ultimate effectiveness of unconventional policies,” El-Erian wrote. “And this issue becomes even more important as the gap between (high) valuations and (sluggish) fundamentals widens.”
6. Thursday marks the final day for hedge funds to file their latest 13F filings with the SEC, which give an update on the fund’s long-only positions as of June 30. Some of the notable funds reporting their stake during the day on Thursday included Third Point’s Dan Loeb, who reported a more than $US1 billion stake in auto loan financing company Ally Financial, Leon Cooperman, who reported a new stake of more than 1 million Apple shares, and Chase Coleman’s Tiger Global, which sold off its entire stakes in Kate Spade and SodaStream.
7. Oil prices are continuing to plunge, with August contracts for Brent crude oil trading in London falling to levels not seen since July 1, 2013. This fall in crude comes despite continued unrest in Iraq, though earlier this week, the International Energy Agency said Europe oil demand growth would be flat for the next two years.
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