US stocks closed higher as the European Central Bank revised growth higher and announced details of its quantitative easing program beginning later this month.
First, the scoreboard:
- Dow: 18,135.94, +39.04, (0.22%)
- S&P 500: 2,102.48, +3.95, (0.19%)
- Nasdaq: 4,986.53, +19.39, (0.39%)
And now, the top stories on Thursday:
- Initial jobless claims rose more than expected last week to 320,000 from 313,000 the previous week. Economists had estimated that claims would fall to 295,000. The four-week moving average of claims rose 10,250 from the previous week to 304,750. “Whether the sustained rise is just another weather-related fluke or the start of a sustained pickup in layoffs is an open question,” wrote UBS’ Maury Harris in a note.
- In other data, factory orders fell for the sixth straight month in January, declining 0.2%. Expectations were for a 0.2% rise, following a 3.4% slump in December. Excluding transportation, orders fell 1.8%. Consumer confidence also rebounded, according to Bloomberg. “Consumer confidence in the U.S. rebounded last week from its lowest level of the year as stocks reached record highs, bolstering Americans’ wealth,” Bloomberg noted, as the company’s Consumer Comfort reading climbed to 43.5 last week from 42.7 the prior week.
- The European Central Bank raised its growth outlook for the bloc as it kept interest rates unchanged and announced details of its quantitative easing program. The ECB is forecasting 1.5% growth this year and 1.9% in 2016, up from 1% and 1.5% respectively. In his press conference, ECB president Mario Draghi said inflation could remain flat through this year and climb to the bank’s 2% target by 2017. The upper cap on the emergency liquidity assistance scheme for Greece’s banks has been raised by €500 million, to up to €68.8 bln. The ECB will buy €60 billion of bonds a month until September 2016.
- Meanwhile, the Euro broke $US1.10 against the dollar for the first time since 2003, falling as low as $US1.0988. Germany’s 10-year bund yield rose to as high as 35 basis points, up almost 11%.
- American Eagle Energy company may be about to default on its bond payments. The Colorado-based energy company missed its first interest payments of nearly $US10 million on Monday, extending the deadline by 30 days as previously agreed. According to Bloomberg, it has hired two financial advisers to help negotiate with bondholders to restructure the debt. Junk bonds partly fuelled the shale boom, but this company may not be able to pay back the money due to the oil crash.
- In February, the oil crash erased 18,299 jobs. The latest monthly report from staffing consultancy firm Challenger, Grey & Christmas noted that “these companies, while reluctant to completely shutter operations, are being forced to trim payrolls to contain costs.” Last month, 16,333 jobs in the energy sector were cut, while the loss of 18,299 jobs overall were blamed on the decline in oil prices. Year-to-date, 36,532 jobs in the energy sector have been lost compared to 513 jobs lost over the first two months of 2014.
- Meanwhile, the Energy Information Administration says the US is running out of storage space for oil because “the exact amount of storage capacity that must be available to maintain operation of crude oil storage and transportation systems is unknown.” And as inventories continue to build, Credit Suisse says the market could enter “super contango.” Contango is a situation where futures prices are higher than expected spot prices. Higher US imports could push inventories to tank tops, widening the WTI-Brent spread, and increasing the need to send the excess oil to international markets. This could send the price of Brent lower unless international demand increases, the firm said.
- Goldman maintained its “Buy” rating on Lumber Liquidators but slashed its price target to $US40 from $US60. “We have no reason not to believe the company’s recent assertions in the face of poor headlines, and have not seen proof of danger to consumers,” Goldman wrote in a note. Lumber Liquidators’ risk/reward looks favourable, and the Chinese-made laminate flooring that reportedly contain dangerous levels of formaldehyde are a small fraction of its output. Shares tumbled as much as 25% this week after a “60 Minutes” report Sunday detailed apparent violations.
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