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Dow Stocks Spike Following Strong Economic Reports

http://www.fool.com/investing/general/2013/08/01/dow-stocks-spike-following-strong-economic-reports.aspx

Dan Dzombak
August 1, 2013

The Dow Jones Industrial Average (INDEX: ^DJI) is up as the market digests yesterday's Federal Open Market Committee statement and today's positive reports on the U.S. economy. As of 1:15 p.m. EDT the Dow was up 114 points, or 0.73%, to 15,613. The S&P 500 (INDEX: ^GSPC) is up 1.02% to 1,703.

There were four U.S. economic releases today.

Report

Period

Results

Previous

New unemployment claims

July 20 to July 27

326,000

345,000

Markit U.S. PMI

July

53.7

51.9

ISM PMI

July

55.4%

50.9%

Construction spending

June

(0.6%)

1.3%

Aside from construction spending, the reports were positive for the economy. New unemployment claims fell by 19,000 to 326,000 -- their lowest level since 2008. The less volatile four-week moving average fell by 4,500 to 341,250.

US Initial Claims for Unemployment Insurance Chart

US Initial Claims for Unemployment Insurance data by YCharts.

July can be an abnormal month for unemployment claims due to holidays and annual shutdowns in the auto industry for retooling. That said, the four-week moving average continues to be below last year's level of 360,000 to 370,000, indicating a stronger employment market. There were also signs of a stronger employment market yesterday when ADP reported that, by its estimates, the private sector added 200,000 jobs in July. We have to wait until tomorrow for the government's jobs report, which includes both public and private-sector jobs.

Also released were purchasing managers' indexes by Markit and the Institute for Supply Management. Markit's U.S. PMI came in at 53.7 for July, better than the earlier reading of 53.2 and June's 51.9. The ISM's PMI jumped to 55.4%, up from June's 50.9%. Both readings are above analyst expectations and show a stronger-than-expected manufacturing sector. It's unclear whether this is a temporary blip resulting from the inventory build seen in second-quarter GDP or a sign of a resurgent manufacturing sector.

The other bit of information the market i