Stock futures climb ahead of weekly jobs report

[August 26, 2010]  NEW YORK (AP) -- Stock futures rose modestly Thursday, but investors were also buying bonds indicating they are cautious ahead of a key weekly reading on unemployment.

Stock futures could be getting a lift from rising markets overseas. European markets rallied Thursday after another strong economic report from Germany. A forward-looking consumer confidence reading in Germany rose as that company's economy rebounds better than was anticipated.

Even with stock futures rising, traders continued to move money into the bond market, sending interest rates lower. That move signals traders are uncertain about the strength of the economy, particularly ahead of the government's latest reading on new claims for unemployment benefits.

The Labor Department is expected to report initial claims for unemployment benefits fell by just 10,000 to 490,000 last week, according to Thomson Reuters. That would snap three straight weeks of rising claims, but still fall well short of where claims need to be to indicate significant hiring. The report is due out at 8:30 a.m. EDT.

The report one week ago on unemployment claims sent the market into a downward spiral that did not end until some late-day buying propped up stocks Wednesday. The Labor Department said in its report last week that initial claims jumped to 500,000, the highest level since November.

In a healthy economy where jobs are being added regularly, claims usually fall below 400,000. At the height of the recession in March 2009, weekly claims peaked at 651,000.

High unemployment remains the biggest obstacle to a stronger recovery because people worried about their jobs have cut back on spending. Companies have been slow to hire because of uncertainty surrounding tax, financial regulation and health care reform costs as well as worries about consumer demand.

Most major economic indicators have pointed to flagging growth in recent months, with jobs data the most obvious sign of that slowdown. Some traders are worried that growth will continue to slow during the second half of the year so much that the country will fall back into recession.

Ahead of the opening bell, Dow Jones industrial average futures rose 14, or 0.1 percent, to 10,061. Standard & Poor's 500 index futures rose 1.90, or 0.2 percent, to 1,056.50, while Nasdaq 100 index futures rose 3.75, or 0.2 percent, to 1,793.50.

The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.51 percent from 2.54 percent late Wednesday. Its yield is often used to set interest rates on mortgages and other consumer loans.

Long-term bond yields are hovering around levels not recorded since early 2009 when the country was in the depths of the recession and stocks hit 12-year lows.

Low interest rates usually help to drive new growth because it makes it cheaper to borrow and buy everything from clothes to cars to houses. But right now, that isn't even encouraging shoppers because they are worried about jobs and opting to save instead.

Germany's DAX index rose 0.5 percent following the upbeat economic report. France's CAC-40 climbed 0.9 percent and Britain's FTSE 100 rose 0.8 percent.

[Associated Press; By STEPHEN BERNARD]

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