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The Dow Jones Industrial Average (NYSEARCA:DIA) is on pace for its sixth consecutive loss. The blue-chip index bounced briefly after the jobless claims report was released, but dipped once traders analyzed the details.
On Thursday, the Labor Department reported that initial claims for state unemployment benefits declined 26,000 to a seasonally adjusted 350,000. It was the biggest drop since January and the lowest level since March 2008. Economists polled by Dow Jones Newswires had predicted 370,000 new applications for jobless benefits. Jobless claims, which are a measure of layoffs, have now fallen for three consecutive weeks. However, the prior week’s 374,000 figure was revised up to 376,000 and the current number appears to be boosted by automakers keeping their doors open longer at this time of the year. In other words, one-time factors are responsible for the better-than-expected report.
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Reuters reports, “A Labor Department official noted that part of the drop might be due to some auto manufacturers keeping their plants open during the first week of July to meet demand. Normally plant closures during that week would lead to a spike in jobless claims, but they did not materialize. That suggests part of the strength in the labor market last week might be due to temporary factors.” Companies such as Ford Motor Co. (NYSE:F) and Chrysler Group LLC both announced in May that they would be reducing their normal shutdown periods in order to meet increased demand.
Further adding to the selling pressure, as Zero Hedge points out, the non-seasonally adjusted claims figure jumped 70,000. As a result of the fine print, the Dow fell nearly 100 points while the S&P 500 (NYSEARCA:SPY) declined about 1 percent. Only four Dow components traded higher this morning. Merck & Co. (NYSE:MRK) and Procter & Gamble Co. (NYSE:PG) both gained 4.3 percent and 2.7 percent, respectively, while McDonald’s Corp. (NYSE:MCD) and Chevron Corp. (NYSE:CVX) edged slightly higher.
Procter & Gamble, the world’s largest consumer-products company, jumped the most in 11 months after the Federal Trade Commission approved its deal with William Ackman’s Pershing Square Capital Management LP. The FTC did not disclose what type of transaction had been approved. “We welcome investment in our company,” Paul Fox, a P&G spokesman, explained to Bloomberg. “We are focused on creating shareholder value by executing on our plan to deliver top and bottom line growth through our $10 billion cost savings program, renewing our focus on innovation, pricing initiatives and improved execution, and reallocating resources to invest in the highest return opportunities.”
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