There's no debating which factor drove stocks generally Thursday. It was not the hyped up Jobless Claims data, which only improved modestly, nor was it the hope that a good Greek government might form, though the Global X FTSE Greece 20 ETF (GREK) gained 3.9% on that very hope. Rather, it was the stellar International Trade data that saved stocks. The SPDR Dow Jones Industrial Average (DIA) and the SPDR S&P 500 (SPY) retraced bigger early gains to end up fractionally on the day, while the PowerShares QQQ (QQQ) ended in the red on a sour note from Cisco Systems' (CSCO) CEO John Chambers.
The International Trade Report for the month of March showed that the trade deficit expanded by $6.4 billion, widening to $51.8 billion. Economists surveyed by Bloomberg had anticipated the deficit would widen only to $49.5 billion. I know, it sounds bad to the casual follower, but the details explain why the enthusiasm.
Both imports and exports increased, with imports rising more so. Exports increased 2.9%, or by $5.3 billion. That's fabulous news given 20% of American exports are sold into Europe, or have been historically. Also, given the slowing of economic growth in important new regions like China, the news was ever so reassuring.
The shares of major benefactors did modestly well, after also retracing on the day's early gains. Much of the export growth was attributed to industrial goods and supplies. The Industrial Select Sector SPDR ETF (XLI) ended fractionally after following that same path. Shares of major industrials like Caterpillar (CAT), Boeing (BA) and General Motors (GM) all closed in the red, as they also contended with soft trade data from China. Consumer stocks benefiting from expansion into China, Yum Brands (YUM) and Starbucks (SBUX), which I recently soured on, both rose over 1.3% on the day. McDonald's (MCD), still contending with a tough April sales report, remained in the red.
Also enthusing, American imports increased by 5.2%, or $11.7 billion. Growth was attributed to capital goods, consumer goods, industrial supplies and materials, and automotive vehicles, parts and engines. Given recent concern about the American economy and consumer, it's certainly good to see imports increasing.
When America's economy was most healthy in the last decade, the trade deficit was wide and expanding. Of course, America's leaders have engaged China over the last few decades for two reasons. The first was for American companies to find cost savings in manufacturing overseas. The second hope was for American companies to find opportunity to participate in the development of the bursting populations of the Far East. Clearly, the hope is that trade will work to our benefit over the long run as well as it has up until now, depending on China's willingness to play fairly. Today, the trade gaps widening still reflects a healthy situation.
One caveat to the enthusing data could be found in the study of March's steep increases in both import and export prices. Fuel prices contributed significantly to both sides of the scale. It's possible that this realization helped to quell some of the day's enthusiasm, and the realization that the jobless claims data was not as exciting as the headlines portrayed. The day's gains may prove fleeting as a result.
Some of the day's leading non-penny stock gainers included InfoSpace (INSP), Virtusa (VRTU), FirstCity Financial (FCFC) and ArcelorMittal (MT) on strong earnings reports. Audience (ADNC) was up 12% on its IPO. Sony (SNE) gained on its earnings and outlook. On the downside, Cisco Systems' decline affected the entire NASDAQ, while other notable losers on the day included Salesforce.com (CRM), Silicon Graphics (SGI), Aeroflex (ARX) and MEMC Electronic Materials (WFR). FedEx (FDX) was lower on its earnings news and the announcement of the acquisition of a privately held French delivery company.