U.S. stocks surged as growth in American payrolls was enough to ease concern about the economy without stoking speculation the Federal Reserve will hasten the end of stimulus. Industrial metals led gains in commodities and the yen weakened, while Treasuries reversed early gains.
The Dow Jones Industrial Average rose 149.21 points to 14,009.79, climbing above 14,000 for the first time since 2007, while the S&P 500 Index (IBEX) jumped 1 percent to return to a five- year high following a two-day retreat. The 10-year Treasury yield rose four basis points to 2.02 percent. Spain’s IBEX 35 Index slid to a one-month low as regulators lifted a ban on short selling, while China’s Shanghai Composite Index capped the best week since October 2011 as manufacturing expanded. The yen sank against all 16 major peers.
U.S. employers added 157,000 jobs in January and employment growth accelerated more than previously estimated at the end 2012, Labor Department figures showed, while other reports on consumer confidence, manufacturing and construction spending topped forecasts. The data eased concern about the world’s largest economy following a report earlier this week that showed gross domestic product shrank last quarter for the first time since the recession.
“The most positive part of the headline was the revisions,” said Liz Ann Sonders, the New York-based chief investment strategist at Charles Schwab Corp., which has $1.95 trillion in client assets. “That’s particularly good because of the negative 0.1 percent GDP report. The market is telling you that the economy is not as bad as many people believe. The fact the January was up very nicely typically bodes well for the rest of the year.”
The Labor Department revised earlier data to show a 196,000 increase in employment for December and a 247,000 surge in November, adding a total of 127,000 to the count for those two months. Labor also issued its annual benchmark update, which aligns data spanning from April 2011 to March 2012 with corporate tax records. The revision showed payrolls grew by an additional 424,000 workers, on an unadjusted basis, in that period. The jobless rate increased to 7.9 percent from 7.8 percent.
“The unemployment rate has increased primarily due to individuals streaming back into the workforce, which is a sign of growth in confidence in the economic expansion, and perhaps the exhaustion of savings and employment benefits,” said Joseph Brusuelas, senior economist at Bloomberg LP, parent of Bloomberg News. “While there are encouraging signs, caution is the proper way for investors to proceed.”
Bank of America Corp., United Technologies Corp. and Verizon Communications Inc. jumped more than 2 percent to lead the Dow’s gain today.
All 10 industry groups in the S&P 500 advanced, with financial, telephone and commodity companies climbing at least 1.2 percent to lead the rally. Tyson Foods Inc. gained 3.1 percent after profits topped forecasts. Zoetis Inc., the animal- health company owned by Pfizer Inc., surged 19 percent in its trading debut following an initial public offering. Merck & Co. slipped 3.3 percent after forecasting a drop in profit this year.
Exxon Mobil Corp. closed little changed after reporting fourth-quarter earnings that topped estimates. Earnings per share beat the average analyst estimate at some 73 percent of 254 companies in the index that have released results so far in the reporting season, data compiled by Bloomberg show.
The Thomson Reuters/University of Michigan final index of U.S. consumer sentiment for January rose to 73.8 from 72.9 at the end of the previous month. Economists projected 71.5 for the gauge after a preliminary January reading of 71.3, according to the median estimate in a Bloomberg survey. The index averaged 64.2 during the last recession and 89 in the five years before the 18-month economic slump that ended in June 2009.
The Institute for Supply Management’s manufacturing index climbed to 53.1 last month from December’s 50.2, exceeding the highest estimate in a survey of 86 economists with a median forecast of 50.7.
About $2.6 trillion was added to the value of equities worldwide last month as earnings from companies including Goldman Sachs Group Inc. beat estimates and U.S. lawmakers forged a deal to avert the so-called fiscal cliff of automatic spending cuts and tax increases. Including dividends, the S&P 500 rallied 5.2 percent last month for its best January return since 1997.
Two-year Treasury yields erased an earlier drop to end little changed at 0.26 percent, while 30-year rates rose six basis points to 3.23 percent.
Bonds reversed gains after Federal Reserve Bank of St. Louis President James Bullard, an advocate for slowing stimulus, said U.S. job growth in the past three months has been “an encouraging sign.” Bullard said he may urge cutting the pace of central bank asset purchases by the middle of the year if growth picks up as he expects.
“We should think about tapering or adjusting the program,” Bullard said today in an interview in Washington. “If you get some good data for a couple of months,” then policy makers might say, “OK, we go to $75 billion or something like that,” he said, referring to monthly asset purchases that currently run at $85 billion a month.
Seventeen of the 24 commodities tracked by the S&P GSCI Index increased, sending the gauge up 0.5 percent to the highest level since September. Nickel, aluminum, copper and zinc added more than 1.4 percent each. Oil rose 28 cents to settle at $97.77 a barrel in New York to cap an eighth straight weekly gain, the longest streak since 2004.
The Stoxx Europe 600 Index advanced 0.3 percent, trimming this week’s drop to 0.5 percent. The gauge climbed in January, capping an eighth month of gains and the longest winning streak since 1997. BT Group Plc (BT/A) rallied 6.5 percent as the U.K’s largest Internet service provider reported profit that exceeded analysts’ estimates. The regional benchmark pared gains earlier while German two-year notes rose after the European Central Bank said banks will repay 3.5 billion euros ($4.8 billion) of its emergency loans next week.
Spain’s IBEX 35 slipped 1.6 percent as the market regulator, known as CNMV, allowed a ban on short-selling stocks to expire yesterday. Banco Santander SA, Spain’s largest bank, fell 2.3 percent and Fomento de Construcciones & Contratas SA slid 9.1 percent.
The yen weakened for a third straight day against the dollar, headed for a 12th consecutive weekly decline. It depreciated as much as 1.2 percent to 92.80 per dollar, the lowest level since June 2010. Japan’s jobless rate rose and household spending declined, data showed today, underscoring the case for further easing.
The euro strengthened against 12 of its 16 major peers, climbing 0.6 percent to $1.3666. In addition to a report showing manufacturing shrank less than forecast in the currency region, other data showed the unemployment rate was 11.7 percent in December, less than forecast.
The MSCI Emerging Markets Index (MXEF) gained 0.4 percent. The Shanghai Composite Index added 1.4 percent, climbing 5.6 percent in the week, and Brazil’s Bovespa increased 1 percent to pare a second straight weekly loss.
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