Stocks Advanced as Economic Fears Eased. Dow Leaders: AA, HD, BA, CSCO, and DIS

Published on Thursday, 02 September 2010 18:38 Written by Christopher Lynn

New York, September 2^nd (TradersHuddle.com) – Stocks gained after a surprise jump in pending home sales, a drop in weekly jobless claims, and largely better than expected back to school sales tempered economic slowdown concerns, ahead of tomorrow’s key August jobs report.

The Dow Jones Industrial Average gained 50.63 points, or 0.49%. The S&P 500 index climbed 9.81 points, or 0.91%, while the NASDAQ advanced 23.17 points, or 1.06%. Market breadth was positive. On the NYSE, winners topped decliners by a rate of 5 to 2. On the NASDAQ, advancers outpaced losers by a rate of 5 to 3.

The market started on a flat note, after yesterday’s big rally. Market participants started the session with lackluster trade after the weekly jobless claims report was better than expected and GDP in the euro zone increased 1% in the second quarter, with the European Central Bank leaving interest rates unchanged.

The Labor Department reported that initial claims for unemployment fell 6,000 to 472,000 last week. The drop was largely in line with the 475,000 claims that were widely expected. However stocks were able to muster support after housing news were better than expected as pending home sales for July jumped a surprising 5.2%, according to The National Association of Realtors. Economists had forecasted a 1.0% drop.

Burger King (NYSE:BKC), the hamburger fast food chain, surged more than 25%, as it confirm reports that it will be acquired by 3G Capital for $24 per share or $3.26 billion. Wendy’s Arby’s Group (NYSE:WEN) jumped 6.80%, as investors speculate the fast food chain will also be a candidate for a private equity deal.

Consumer discretionary, industrials, materials, and financials were the best performing sectors, with utilities as the only declining sector among the 10key S&P 500 sectors.

Consumer discretionary stocks gained 1.8% in the session, helped by retailers, which had mixed same-store sales reports, but largely beating back to school sales expectations. On the bright side, Nordstrom (NYSE:JWN), the high-end department store operator, jumped more than 8% after the department store operator reported August sales climbed 6.3%, beating analysts’ expectations. On the same line, Limited Brands (NYSE:LTD), the operator of specialty stores like Victoria Secret and Bath and Body Works, also surged more than 6% on better than expected same store sales in August.

The housing data and lower weekly jobless claims, spurred investors to bid homebuilders and home improvement retailers. Home Depot (NYSE:HD), the largest home improvement retailer, gained more than 2.58% to $29.41, posting the second biggest percentage gain in the Dow Jones Industrial Average.

Walt Disney (NYSE:DIS), the largest media company in the world, also benefited from the sector strength, as it shares climbed 1.19% to $3.91, making it the fifth best Dow component.

On the materials sector, Alcoa (NYSE:AA), the aluminum producer, jumped close to 3% to $10.83, posting the biggest percentage gain in the blue chip index and helping the sector to a 1.1% gain.

Economic sensitive stocks gathered strength as investors economic slowdown concern were tempered a bit ahead of August Jobs report. The industrial sector gained 1.3%, with Boeing (NYSE:BA), the world’s second largest commercial aircraft maker, as the third best Dow component, as shares climbed 1.77% to $63.39.

On the energy sector, reports of a fire in an oilrig platform in the Gulf of Mexico owned by Mariner Energy (NYSE:ME), send shares plunging on initial news more than 16%, before recovering to a loss of only 2.57% after initial reports showed that it was not an explosion but a fire and that all employees have been accounted for and no oil had spill as it was on an inactive well. Apache (NYSE:APA), who had agreed to acquire Mariner, also saw increased volatility. Crude oil prices bounced above $74 per barrel, as concern regulations will further reduce output in the region.

And Cisco (NASDAQ:CSCO), the world’s largest networking gear maker, was the fourth best Dow component, as shares gained 1.28% to $20.52.

Meanwhile, Treasuries fell again, as demand for safe haven decreased on the surprise jump in pending home sales. The yield on the benchmark 10-year note climbed 5 basis points to 2.62%.