US markets jump on Spain’s austerity plan and jobless claims

The US markets rose sharply on Thursday, with S&P 500 index rebounding following a five-session losing spell, after Spain detailed an austerity plan that focuses on spending cuts instead of tax increases and stronger-than-expected data on the US jobs market. Also, initial jobless claims fell by 26,000 to 359,000 in the last week, the lowest since late July, while revised government figures found the US economy created 386,000 additional jobs from March 2011 to March 2012 than previously thought. On the other hand, other reports showed that US economy grew less than expected in the second quarter, and separately, a rise in demand for capital goods in August did not make up for drops the prior two months. Orders for non-defense capital equipment excluding airplanes climbed 1.1% while total orders for durable goods fell 13%. Separately, the National Association of Realtors reported pending-home sales retreated in August from a two-year high the prior month.

However, the government chopped its estimate of US growth in the second quarter, as consumers and businesses spent and invested less than initially believed. Gross domestic product in the April-to-June period increased by 1.3% instead of 1.7% as previously reported, the Commerce Department stated in its third and final review of second-quarter growth.

In Europe, Spanish Prime Minister Mariano Rajoy’s government announced an austerity plan to reduce the nation’s budget deficit, which features 40 billion euros ($51.7 billion) of spending cuts in 2013, resulting in an 8.9% decline in government spending compared with this year. Social spending will make up 64% of the proposed budget. Investors had also been anticipating a formal request by Spain for financial help from its partners in the euro zone, which is needed for the European Central Bank to start buying the country’s bonds on the secondary market.

The Dow Jones Industrial Average gained 72.46 points, or 0.54 percent, to close at 13,486.00, the S&P 500 finished up by 13.83 points, or 0.96 percent at 1447.15, while the Nasdaq ended higher by 42.90 points, or 1.39 percent to settle at 3136.60.

Indian ADRs closed mostly in green on Thursday, HDFC Bank was up 0.69%, ICICI Bank was up 0.55%, Tata Motors was up by 0.45% and Infosys was up by 0.42%. On the other hand, MTNL was down by 0.10%.