Dow soars 4pc as US posts four-month low in its jobless rate
The Dow index of America's top 30 companies soared 3.9pc last night as the market reacted to the news that the number of Americans unemployed fell to a four-month low last week. This gave a sliver of hope for an economy battered for days by a credit-rating downgrade and falling share prices.
The jobless-claims data released by the US Labour Department yesterday eased concerns the economy was heading back into recession and buoyed US stocks.
Initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 395,000, the Labour Department said, the lowest level since early April. Economists had expected a reading of 400,000.
The optimism generated by the report was dampened somewhat by a jump in the trade deficit to $53.1bn (€37.3bn) in June, the largest since October 2008, from $50.8bn (€35.7bn) in May.
As a result of the wider trade, shortfall economists estimated the government could lower the second quarter's already weak annual growth pace of 1.3pc to 0.9pc.
The government will release its second estimate for second quarter gross domestic product (GDP) on August 26. The economy grew at a 0.4pc rate in the first quarter.
The Federal Reserve said on Tuesday economic growth was considerably weaker than expected and unemployment would fall only gradually. The US central bank promised to keep interest rates near zero until at least mid-2013.
Hiring accelerated in July after abruptly slowing in the past two months.
However, there are worries that a sharp sell-off in stocks and the nasty fight between Democrats and Republicans over raising the government's debt ceiling could dampen employers' enthusiasm to hire new workers.
Stocks have dropped sharply in recent weeks on fears of a new recession, which were exacerbated by Standard & Poor's decision to strip the US of its top notch AAA credit rating last Friday.
A sovereign debt crisis in Europe has also not helped.