3 Reasons Markets Rallied After Initial Jobless Claims Fell Below 400K

Markets closed up on Wall Street today: Dow +3.90%, S&P +4.59%, Nasdaq +4.69%, Oil +3.22%, Gold -1.54%.

On the commodities front, Oil (NYSE:USO) climbed to $85.56 a barrel, while precious metals declined, with Gold (NYSE:GLD) falling to $1,756.90 an ounce and Silver (NYSE:SLV) down 1.57% to $38.87 an ounce.

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Today’s markets were up because:

1) Jobless claims. Initial unemployment benefits claims fell below the 400,000-mark for the first time last week in nearly four months, a mark that is very important because anything below it means the market is growing — that more jobs are being created than eliminated. The last time weekly initial jobless claims were below 400,000 was April. The news is a positive follow up to Friday’s Labor Department report that had the economy adding 117,000 jobs in July, and would seem to prove that the economy is slowly but surely beginning to improve, despite so much recent evidence to the contrary.

2) Italy. The economies and markets of Europe and the U.S. are inextricably linked, or at least have been of late. One’s sovereign debt crisis is felt by all, another’s downgrade is felt overseas — such has been the case for months, with U.S. stocks tending to mirror European stocks, which get an earlier start on the day, but also vice versa. Today, CNBC reported that Italy (NYSE:EWI) might place a ban on “naked” short selling, in which investors sell a financial instrument without first borrowing it. The news relieved some stress on the country’s markets, and ultimately European stocks finished higher, despite the weight of France’s (NYSE:EWQ) increasing deficit, and worries that the second-largest euro-zone economy could be in danger of a downgrade.

3) Cisco. After a better-than-expected earnings report, Cisco Systems (NASDAQ:CSCO) led networking and telecom hardware stocks in strongly outperforming the Nasdaq. Among some of the biggest gainers were Cavium Inc. (NASDAQ:CAVM), JDS Uniphase (NASDAQ:JDSU), and NetLogic Microsystems (NASDAQ:NETL), all climbing over 11% today.

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