U.S. stocks straddled the line between gains and losses in light volume Thursday, with the Dow industrials not far from their bull-market high in the final session of the index's best first quarter in more than a decade. After a round of economic reports, investors remained cautious ahead of Friday's monthly payrolls report. The Dow Jones Industrial Average wavered between slight gains and losses, before closing its best first quarter since 1999. The index ended 0.2% lower on the day at 12,320. The Dow is some 6.4% higher for the first three months of the year. Up around 5.4% for the first quarter of 2011, the Standard & Poor's 500 Index closed 0.2% lower at 1,326, with natural-resource and industrials leading sector gains and consumer-discretionary and financials falling. Shares of American International Group Inc. (AIG) fell 2.6% after the Federal Bank of New York rejected the insurer's $15.7 billion bid for a subprime mortgage portfolio that the government had bought from AIG during the height of the financial crisis. Berkshire Hathaway Inc.'s shares also declined after Chairman Warren Buffett said David Sokol, viewed as a top contender to succeed Buffett, had unexpectedly resigned. The Nasdaq Composite Index gained 4.28 points, or 0.15%, to 2,781.07, up 4.8% for the quarter. Growing optimism that the U.S. economic recovery is strengthening has fueled this quarter's gains despite turmoil overseas. Worries over the destruction in Japan and the conflicts in the Middle East and North Africa briefly sent the Dow down 6.3% this spring, and the benchmark indexes were trading nearly flat for the year just two weeks ago. Since then, the indexes have rebounded vigorously. Others have pointed to recent U.S. economic data as a reason for cautious confidence looking toward the second quarter. On Friday, the government will release its closely watched monthly employment report. A survey of economists by Dow Jones Newswires pointed to an increase of 195,000 jobs in March. Thursday, the Labor Department said initial claims for unemployment benefits fell by 6,000 to a seasonally adjusted 388,000 in the week ended March 26. While economists were expecting a drop of only 2,000, the prior week's figures were revised up to 394,000, from an originally reported 382,000.
European markets fell Thursday, as concerns over the results of Irish banks' stress tests prompted investors to sell financial shares across the continent. Data also showed an acceleration in euro-zone inflation, to a 2.6% annual rate in March from 2.4% in February, adding to the negative sentiment. The blue-chip Euro Stoxx 50 index fell 1.2% to 2,582.9, led by banks such as Italy's Intesa Sanpaolo SpA, shares of which slumped 4.5%. UniCredit SpA fell 3.7%, France's Societe Generale was down 3.4% and Spain's BBVA fell 2.9%. Right after the close of European trading, Ireland's central bank released stress-test results, which showed that four Irish banks will be required to raise EUR24 billion in order to meet new capital requirements. Shares across the Irish bank sector had been suspended ahead of the announcement. Southern European markets posted particularly heavy losses. Italy's FTSE MIB index dropped 1.2% and Spain's IBEX 35 index slipped 1.5%. In Greece, the ASE Composite fell 1.5%, while Portugal's PSI 20 index declined 1.3%. The Stoxx Europe 600 index closed down 1% at 275.9, with retailers posting heavy losses. Shares of Hennes & Mauritz AB sank 3.2% after the clothing retailer said first-quarter net profit dropped 30%. Also in the sector, Dixons Retail PLC tumbled 8.2% in London, extending losses from the previous session. In France, the CAC 40 index fell 0.9% to 3,989.2, pressured by bank stocks. Credit Agricole sank 3.6%. Car maker Renault SA, which rose 0.7%, was the index's biggest gainer. Germany's DAX 30 index edged down 0.2% to 7,041.31. Shares of Munich Re rose 1.4%. In London, the FTSE 100 closed down 0.7% at 5,908.8, as shares of banking giant HSBC Holdings PLC dropped 2.3%.
Chinese stocks declined Thursday on renewed concern about further monetary-policy tightening by the country's central bank. Most other Asian markets posted gains after another day of advances on Wall Street. Hong Kong shares extended gains on the back of strong earnings reports from a number of companies. Japanese stocks recovered from early losses as the yen's recent weakness and optimism about reconstruction after the devastating earthquake and tsunami on March 11 aided investor sentiment. Volumes in some markets including Japan were modest on caution ahead of the release of key nonfarm payrolls figures for March Friday. Japan's Nikkei Stock Average climbed 0.5% to 9,755.10, narrowing its overall losses in March to 8.2%. Nissan Motor Co. rose 1% after the Nikkei newspaper reported that the company and France's Renault SA were considering a structure that would put the two companies under a single umbrella. Shares of Tokyo Electric Power Co., operator of the Fukushima nuclear plant, was unable to hang on to its early gains and finished unchanged. Meanwhile, Hong Kong's Hang Seng Index rose 0.3% to 23,527.52, South Korea's Kospi added 0.7% to 2,106.70, and Taiwan's Taiex advanced 0.4% to 8,683.30. China's Shanghai Composite Index took a different path and finished at 2,928.11, dropping 0.9%.
Base metals closed higher on the London Metal Exchange Thursday after the U.S. dollar slipped against the euro. LME three month copper gained 0.5% from Wednesday's PM kerb close, to end the session at $9,427 a metric ton. Three-month aluminum climbed 0.7% to $2,648/ton, while three month lead jumped 1.5% to $2,694/ton. The markets strengthened as the euro rose, with investors casting aside concerns over sovereign debt troubles in the euro zone to focus on the possibility of a rate increase by the European Central Bank. Other dollar-denominated commodities also benefited from the move, as a weaker greenback makes them cheaper for other currency holders. Oil futures settled at their highest level in 2 1/2 years Thursday as the dollar weakened and Libyan rebels suffered a setback, raising fears that the conflict could be prolonged. Gasoline and heating oil futures also surged to their highest levels in more than two years. Light, sweet crude for May delivery settled up $2.45, or 2.4%, at $106.72 a barrel on the New York Mercantile Exchange, marking the contract's highest settlement since September 2008. Brent crude on the ICE futures exchange settled up $2.23, or 1.9%, to $117.36, the highest since August 2008. Gold futures ended at a new record settlement on worries about Europe's financial system and forecasts for higher gold demand from India. The most actively traded contract, for June delivery, gained 1.1%, or $15, to settle at $1,439.90 a troy ounce on the Comex division of the New York Mercantile Exchange. This was 40 cents higher than the previous record settlement of $1,439.50 set March 23. The April-delivery contract was up 2.1%, or $15.10, at $1,438.90 a troy ounce.