Market update: Psychological warfare – S&P 500 eyes 1,500 mark

The S&P 500’s 0.01% gain made it seven straight winning days for the index, although there are signs that momentum is beginning to wane; the index is hovering just below the 1,500 mark, a psychological barrier it must break through if it is to surpass 2007’s pre-crisis high of 1,565. The Nasdaq was off 0.7% as heavyweight tech firm Apple’s earnings announcement disappointed the market. Economic data provided some positive surprises, though, when the Markit Purchasing Managers Index (PMI) showed that US factory activity had grown the most in nearly two years in January, and the Labor Department’s report revealed claims for jobless benefits dropped to a five-year low last week. Data from Europe was less encouraging, however, with weaker-than-expected French PMIs, and Spanish unemployment rising to 26% – twice the European average.

London opened cautiously this morning ahead of official UK gross domestic product (GDP) data, which has now been released: the economy shrank 0.3% in the last three months of 2012 according to the Office of National Statistics. Lower output from North Sea oil production and manufacturers was behind the slump, putting it closer to a third recession. On the continent, it was better news as Germany’s monthly Ifo survey of business confidence came in better than expected (FTSE 100 +0.08%; FTSE Eurofirst 300 +0.06%).