US stocks in best September showing since 1939

Wall Street managed to wrap up its strongest September since 1939 despite underlying concerns that the US economy is recovering too slowly to sustain growth.

Historically one of the slowest months of the year, September saw the Dow Jones index close 7.72 percent higher than the previous month, even though the US recovery remained slow.

The last time Wall Street saw a stronger September, when the Dow Jones soared 13.49 percent, was at the start of World War II, when traders anticipated a strong rise in demand for US manufactured goods and war materials.

“September is usually one of the worst months of the year, but this is an unusual year with the fact that we keep going back and forth about which direction the economy is going,” said analyst Owen Fitzpatrick of Deutsche Bank.

Analysts said this September’s rise did not reflect any optimism about the US economy as new data on jobs and economic growth released on Thursday continued to indicate the economy was recovering at a slow pace.

September’s gains are “a combination of technical and sentiment-driven factors as opposed to any strong expectation that the economy was getting that much better,” said Michael James, equity trading managing director at Wedbush Morgan Securities.

“It would be a mistake to draw a conclusion that the market strength is a vote of confidence in a significantly improving US economy.”

On Thursday, the blue-chip Dow Jones Industrial Average fell 47.23 points (0.44 percent) to 10,788.05 at the closing bell, while the broader S&P 500 index was down 3.53 points (0.31 percent) to 1,141.20 points.

The tech-rich Nasdaq composite index lost 7.94 points (0.33 percent) to 2,368.62 points.

All three indexes opened trade with gains after the Department of Commerce said the US economy grew slightly more than previously thought in the second quarter of 2010.

Gross domestic product, which measures the output of goods and services in the United States, increased at an annual rate of 1.7 percent in the second quarter, it said.

The figure nevertheless marks a sharp decline from the first quarter, when GDP increased 3.7 percent.

At the same time, the Labor Department released figures showing the number of Americans filing new claims for jobless benefits fell more than expected last week for the third time in four weeks.

Claims for the week to September 25 fell to 453,000, down 16,000 from the previous week’s revised figure, according to the Labor Department. The latest figure also beat most analysts’ expectations.

Separately, the ISM-Chicago Business Survey rose in September to chalk up a full twelve months of expansion, showing an improvement in industrial activity in the key area.

Trade was also initially buoyed by a 4.14 percent rise in AIG shares after the troubled US insurer said it reached a deal to repay a multi-billion-dollar taxpayer bailout received at the height of the global financial crisis.

But the cautious optimism failed to hold out throughout the day as traders pored over the data.

Among stocks in focus Thursday, US aerospace giant Boeing saw its shares rise 0.86 percent after winning a rash of government contracts and despite announcing it was delaying the delivery for its new 747-8 cargo airplane to mid-2011 due to problems discovered during flight tests.

Car renter Avis stocks rose 1.13 percent after it said it was ready to increase by 20 million dollars its bid to buy Dollar Thrifty after it rejected an acquisition offer from rival Hertz, who shares slumped four percent.

The bond market remained stable, with the yield on the 10-year US Treasury bond rose to 2.52 percent from 2.51 percent on Wednesday, while that on the 30-year bond was unchanged at 3.69 percent.
Source: AFP

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