U.S. Stocks Rise as Jobs Report Fails to Erase S&P’s Weekly Gain
July 09, 2011, 12:22 AM EDTBy Cecile Vannucci
July 9 (Bloomberg) -- U.S. stocks rose this week, giving the Standard & Poor’s 500 Index its biggest rally in 21 months, as gains in technology and commodity companies were enough to overcome yesterday’s drop following the worst monthly jobs report since September.
The S&P 500 lost 0.7 percent yesterday after American employers added 83 percent fewer jobs in June than economists forecast. Computer, materials and energy companies in the index advanced 0.9 percent or more this week, the most among 10 groups. Target Corp. and Limited Brands Inc. rose 6.7 percent and 4.4 percent, respectively, after the retailers topped sales projections, helping drive the industry to a record high.
The S&P 500 advanced 0.3 percent to 1,343.80 this week, extending its climb since June 24 to 5.9 percent. That’s the biggest two-week increase since October 2009. The Dow Jones Industrial Average gained 74.43 points, or 0.6 percent, to 12,657.20. Both measures rallied even after Moody’s Investors Service cut Portugal’s debt rating to junk.
“We’ve had a pretty good run up,” said Stephen Solaka, who oversees about $50 million as co-founder of Belmont Capital Group in Los Angeles. “Given the jobs number, the sell-off is pretty muted. The market is shrugging off a lot of anxiety in the economy and in Europe.”
Equities have rebounded in July after the S&P 500 tumbled 3.2 percent in May and June. Before yesterday’s drop, the index was 10.39 points away from its April 29 close, which was the highest level in almost three years. The jobs report hurt companies most tied to the economy, with financial and industrial stocks slipping 1.1 percent or more.
Cyclical Trend
Losses in companies reliant on economic growth yesterday represented a reversal from the past three weeks. The Morgan Stanley Cyclical Index tracking manufacturers, commodity producers and transportation stocks rose 10 percent between June 16 and July 7, beating the Morgan Stanley Consumer Index of drugmakers and grocers by 6.6 percentage points. Amid concern the debt crisis in European nations including Greece would slow global growth, the consumer index outperformed the cyclical index by 9.7 points between Feb. 17 and June 16.
The S&P 500 dropped the most in two weeks yesterday after Labor Department data showed U.S. employers added 18,000 workers in June, the fewest in nine months and less than the most pessimistic forecast in a Bloomberg News survey of economists. The median forecast was for growth of 105,000. The jobless rate rose to a 2011 high of 9.2 percent.
“The number is horribly disappointing,” said Todd Schoenberger, LandColt Trading LLC managing director in Lewes, Delaware. “The monthly jobs figure continues to frustrate Americans and the short-term outlook appears to be dire.”
Technology companies in the S&P 500 rose the most among 10 groups, climbing 1.6 percent.
Technology, Energy Shares
Microsoft Corp., the world’s biggest software maker, posted the biggest gain in the Dow, rising 3.5 percent to $26.92. Intel Corp., the world’s largest chipmaker, climbed 2.5 percent for the second-biggest increase in the Dow to $23.09. International Business Machines Corp., the world’s largest computer-services company, advanced 1.1 percent to $176.49.
Energy shares in the S&P 500 added 0.9 percent as crude oil for August delivery rose 1.3 percent. Chevron Corp., the second- largest U.S. oil company, jumped 1.7 percent to $105.89. Retailers in the S&P 500 rallied 2.7 percent, climbing to a record high on July 7, as discounts and lower gas prices in the U.S. enticed consumers to spend last month. Target rose 6.7 percent to $51.14, and Limited Brands gained 4.4 percent to $40.62. Clothing retailer Urban Outfitters Inc. rallied 11 percent, the most in the S&P 500, to $32.03 after Morgan Stanley recommended investors buy the shares. Morgan Stanley raised the stock to “overweight” from “equal weight.”
Bank Shares
Department-store chain Kohl’s Corp. climbed 6.6 percent to $55.18 as June retail sales surpassed analysts’ projections.
The KBW Bank Index fell 1.8 percent as 19 of its 24 companies dropped. Bank of America Corp., the largest U.S. lender, lost 3.5 percent, the biggest decline in the Dow, to $10.70. JPMorgan Chase & Co., the second-biggest U.S. bank by assets, dropped 2 percent to $40.74.
Alcoa Inc., which rose 0.4 percent to $16.38 this week, will become the first Dow company to report second-quarter earnings on July 11. Corporate profits are forecast to have grown by 13 percent in the period, according to analyst estimates compiled by Bloomberg, the smallest gain in two years.
“We’re going to see the end of the period of positive surprises,” said Hayes Miller, Boston-based head of asset allocation in North America at Baring Asset Management Inc., which oversees $51.5 billion. “Consumption is going to really be a very low level of growth for the next year and a half.”
--With assistance from Brooke Hawkins in New York. Editors: Nick Baker, Jeff Sutherland
To contact the reporter on this story: Cecile Vannucci in New York at cvannucci1@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
