Bloomberg News

U.S. Stocks Cap Longest Weekly Gain Since August on Jobs

December 08, 2012

U.S. stocks rose a third week, giving the Standard & Poor’s 500 Index its longest winning streak since August, as employment growth topped forecasts and investors weighed prospects for a budget agreement in Washington.

Citigroup Inc. (C:US) surged 8.9 percent on plans to cut more than 11,000 jobs and scale back in some emerging markets to drive down costs. Netflix Inc. (NFLX:US) jumped 5.2 percent after the online video service signed a multi-year agreement with Walt Disney Co. Apple Inc. (AAPL:US) sank 8.9 percent, the most since 2010, on concern the company will lose ground in smartphones to Nokia Oyj (NOK:US) in China and give up market share to Google Inc. in tablets.

The S&P 500 (SPXL1) increased 0.1 percent to 1,418.07 for the week. The benchmark measure for American equities extended its advance from a three-month low on Nov. 15 to 4.8 percent and finished at the highest level since Election Day. The Dow Jones Industrial Average added 129.55 points, or 1 percent, to 13,155.13.

“The market took the jobs report as an encouraging sign,” said Brad Sorensen, director of market and sector analysis at San Francisco-based Charles Schwab Corp. His firm has $1.9 trillion in client assets. “There’s also a bit of Washington fatigue. It seems like Congress and the administration have managed to come through with a deal at the last minute multiple times before. We’re relatively neutral at this point in time.”

The S&P 500 is down 0.7 percent since President Barack Obama was re-elected on Nov. 6 as he seeks a deal with Republican lawmakers to prevent more than $600 billion of automatic tax increases and spending cuts from coming into effect next year.

Budget Talks

Stocks started the week lower as House Republicans, rejecting Obama’s demand for tax rate increases, proposed $1.4 trillion in spending cuts and $800 billion in new revenue by limiting tax breaks and capping deductions for top earners. A day later, Obama told Bloomberg Television that the Republican offer doesn’t go far enough and won’t raise the revenue needed to shrink the deficit by $4 trillion over the next decade.

On Dec. 5, Obama told a business group that “nobody wants to get this done more than me” and lawmakers probably could solve the budget debate in about a week if Republicans move. U.S. House Speaker John Boehner said on Dec. 7 “there’s no progress to report” on talks.

Investors also watched economic reports. Employment climbed by 146,000 in November and the jobless rate declined to an almost four-year low of 7.7 percent. Orders for equipment such as computers and electrical gear climbed in October by the most in eight months. Service industries in the U.S. unexpectedly grew at a faster pace in November. Confidence among consumers fell more than forecast in December.

Mixed Data

“We’ll be on this wait-and-see mode,” said Brian Jacobsen, who helps oversee $208 billion as chief equity strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. “We’ve had a decent jobs report, but a really bad consumer sentiment report. What we should expect going forward is this mixed bag of data. Perhaps after we get past this fiscal cliff issue we could see a pick-up in confidence.”

Financial shares had the biggest gain in the S&P 500 among 10 industries, adding 1.7 percent. Measures of commodity and technology shares in the index dropped at least 1.4 percent.

Citigroup surged 8.9 percent to $37.64. The lender will take a $1 billion charge this quarter to cover the 4.2 percent workforce reduction, which includes 1,900 jobs in trading, investment banking and transaction services. The bank said it wants to improve productivity in markets businesses such as cash equities where profit is lagging.

Banks Rally

The KBW Bank Index of 24 stocks rose 1.6 percent. The measure has surged 25 percent so far this year, compared with a 13 percent gain for the S&P 500. Bank of America Corp. (BAC:US) jumped 7.9 percent to $10.64. JPMorgan Chase & Co. (JPM:US) added 3.6 percent to $42.56.

Dell Inc. advanced 8.5 percent to $10.46. Goldman Sachs Group Inc. upgraded the stock to buy and said the company’s net cash balance could present an opportunity for a leveraged buyout.

Akamai Technologies Inc. (AKAM:US) increased 6 percent to $38.82 after forging a deal with AT&T Inc. (T:US) to provide the carrier’s business customers with content-delivery services.

Netflix climbed 5.2 percent to $85.98. The Disney agreement starts with movies released in 2016, the companies said in a statement. Financial terms weren’t revealed. The accord includes new direct-to-video releases and older classics such as “Dumbo.”

Travelers Cos. (TRV:US) rose 3.6 percent to $73.39. The lone insurer in the Dow average said it is resuming share buybacks after projecting that superstorm Sandy will cost the company about $650 million. The stock advanced to a record on Dec. 5.

Apple Tumbles

Apple tumbled 8.9 percent to $533.25. China Mobile Ltd. (941) agreed to carry the Lumia 920T, a device based on Microsoft Corp. (MSFT:US)’s Windows Phone 8 software, the companies said. China Mobile said that Apple, which has agreements with China Telecom Corp. (728) and China Unicom (Hong Kong) Ltd. to sell iPhones in the world’s largest mobile-phone market, must further discuss details about benefit sharing before a deal can be reached on offering the handset.

The stock’s slide also may be the result of traders predicting a drop after the shares failed to sustain a recent rally, a “classic technical breakdown,” according to Gene Munster, an analyst at Piper Jaffray Cos.

Munster said new margin rules also may have been put in place for some investors that could limit how many Apple shares a firm can own. Investors may also be disappointed Apple isn’t issuing a special dividend like Oracle Corp. (ORCL:US), Wal-Mart Stores Inc. (WMT:US) and other U.S. companies, he said.

$9 Billion

Freeport-McMoRan Copper & Gold Inc. (FCX:US) plunged 19 percent to $31.70. The world’s largest publicly traded copper producer agreed to buy (FCX:US)Plains Exploration & Production Co. (PXP:US) and McMoRan Exploration Co. (MMR:US) for about $9 billion as the company returns to its roots in energy.

The move was criticized by BlackRock Inc., one of its largest investors, and Dan Rohr, an analyst at Morningstar Investment Service, for failing to create any obvious cost savings. Freeport said the deals will help it to keep expanding.

Gap Inc. (GPS:US) dropped 7.7 percent to $31.81 amid speculation the biggest U.S. specialty-apparel retailer won’t follow rivals such as American Eagle Outfitters Inc. and Coach Inc. in paying special dividends (GPS:US) or accelerating payments this year.

Darden Restaurants Inc. (DRI:US) slumped 12 percent to $46.66. The owner of the Red Lobster and Olive Garden chains reported preliminary fiscal second-quarter profit that trailed estimates.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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Companies Mentioned

  • C
    (Citigroup Inc)
    • $48.22 USD
    • 0.04
    • 0.08%
  • NFLX
    (Netflix Inc)
    • $345.74 USD
    • 14.33
    • 4.14%
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