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Repeat Theme? Weaker Dollar, Stronger Oil Propping Up Stocks

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February 4, 2016

(Thursday Pre-Market) Oil was pointing higher for a second session and that was good enough for Wall Street in Thursday’s early action. Add in the presumed benefits for export-heavy stocks from a slightly softer dollar and the tone was cautiously upbeat.

The improved mood follows a head-spinning session on Wednesday, when the tech-heavy NASDAQ Composite (COMP) lagged but the S&P 500 (SPX), in figure 1, and the Dow Jones Industrial Average ($DJI) closed the day in the green. Oil prices got at least a short-term lift from a weaker dollar. Greenback selling intensified following a U.S. service-sector report on Wednesday that stirred some Street buzz for a slower-moving Federal Reserve. Wednesday’s stock-driving factors stuck around early Thursday.

stock averages gain

FIGURE 1: CAN THE WEEK BE SALVAGED?

The S&P 500 (SPX), plotted here through Wednesday on TD Ameritrade’s thinkorswim® platform, held the psychologically significant 1900 line so far this week. Is 1950 in reach? Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

Jobless Claims Rise, Still Low. Initial jobless benefits claims rose in the last week of January but remained at a very low level, historically. New claims rose by 8,000 a seasonally adjusted 285,000 in the seven days stretching from Jan. 24 to Jan 30, government data showed. The increase was a bit higher than the 280,000 forecast of economists polled by MarketWatch. The less-shaky, four-week average of initial claims increased 2,000 to 284,750. Any number below 300,000 is historically considered a sign of a robust labor market, but claims are no longer falling rapidly like they did from 2010 to 2015, MarketWatch notes. The Thursday report sometimes helps set the tone for the monthly payrolls release, which is due for release Friday morning. As for Friday’s report, economists polled by MarketWatch forecast nonfarm payrolls rose by 180,000 jobs last month, down from the substantial 292,000 in December.

Draghi’s Fightin’ Words. The challenge of mixed strategies among the globe’s major central banks became apparent again. European Central Bank President Mario Draghi fired back at a warning from Germany's Bundesbank that the ECB shouldn't overreact to a sharp drop in oil prices, MarketWatch and other financial media reported. Draghi warned that central banks "cannot be relaxed" in the face of a series of shocks to commodity prices. Cheaper oil and other "forces in the global economy" that are holding down consumer prices "should not lead to a permanently lower inflation rate," he said, according to the reports. "They do not justify inaction."

GoPro Guidance is a Miss. GoPro (GPRO) fell sharply early Thursday, hitting a fresh lifetime low, after the action-camera company late Wednesday issued a Q4 loss and offered a forecast that fell short of Wall Street expectations. GoPro said it expects sales of $160 million to $180 million in the current quarter, far below average analyst expectations of $291 million, according to FactSet, and the company's full-year guidance of $1.35 billion to $1.5 billion was below analysts' expectations of $1.6 billion.

Good Trading,

JJ

@TDAJJKinahan

economic release calendar

FIGURE 2: ECONOMIC AGENDA.

This week’s U.S. economic report calendar. Source: Briefing.com.

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