Why the Dow Is Reclaiming Yesterday's Lost Ground

After falling nearly 100 points for no apparent reason yesterday, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is currently retaking most of the lost ground despite worse-than-expected weekly jobless claims and a disappointing first-quarter GDP estimate. With about an hour left in the trading session, the blue-chip index is up by 90 points, or 0.59%.

Investors were reminded this morning that while the unemployment situation is improving, it's doing so in fits and starts. According to data released by the Department of Labor today, the number of Americans filing for unemployment insurance increased last week by 10,000 to 354,000. On the face of it, this is unquestionably bad news. At the same time, however, given that it only covers a one-week time period, its susceptibility to variation is high.

Also out today were revised figures on the nation's first-quarter GDP. For the three months ended March 31, the Bureau of Economic Analysis estimates that domestic output expanded at an annualized rate of 2.4%. While this was lower than the BEA's previous estimate of 2.5% and also came up slightly short of the consensus forecast, there were a number of positive signs. Among others, both consumer spending and international trade are headed in the right direction, offset in part by a reduction in government expenditures.

In terms of individual stocks, the Dow is being led this afternoon by Bank of America (NYSE: BAC  ) , which is up by 3.2% at the time of writing. Its larger rival JPMorgan Chase (NYSE: JPM  ) isn't far behind, with shares up 2.2%.

The performance of both banks is likely a function of two things. In the first case, the National Association of Realtors reported this morning that pending home sales increased last month by 0.3% compared to March and 10.3% on a year-over-year basis. And in the second case, data from Freddie Mac showed that mortgage rates, which both of these banks rely on to fuel their bottom lines, are ascending as well. The rate on a 30-year fixed-rate conventional mortgage for the current week came in at 3.81%, or 22 basis points higher than last week.

Headed lower, alternatively, are shares of Disney (NYSE: DIS  ) , down by 1.6% in mid-afternoon trading. The entertainment company has been in the spotlight of late after reporting that it will lay off hundreds of employees from its highly profitable ESPN division. The move is in line with other companies seeking to boost their bottom lines despite tepid revenue growth. What's of particular concern to Disney investors, however, is the possibility that new competition will enter the market and further pressure margins. Among others, News Corp's Fox network is purportedly slated to enter the field in the not-too-distant future.

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