Bloomberg News

Stocks Gain With Treasuries, Metals as Dollar Falls on Jobs Data

October 22, 2013

Frankfurt Stock Exchange

European shares were little changed before U.S. jobs data. Photographer: Ralph Orlowski/Bloomberg

U.S. stocks rose with Treasuries, while European shares extended the longest rally since 2010, as lower-than-forecast growth in American payrolls spurred speculation the Federal Reserve won’t rush to withdraw stimulus.

The Standard & Poor’s 500 Index (SPX) advanced 0.6 percent to 1,754.67 at 4 p.m. in New York, reaching a record for a fourth straight day, and the Stoxx Europe 600 Index added 0.4 percent for a ninth consecutive gain. Ten-year Treasury yields fell 9 basis points to 2.51 percent, the lowest since July. The Bloomberg U.S. Dollar Index dropped 0.5 percent to an almost nine-month low. Copper and gold rose more than 1 percent while oil slid to an almost four-month low of less than $98 a barrel.

The S&P 500 extended its 2013 gain to 23 percent, on pace to challenge 2009’s 23.45 percent advance for its best yearly rally in a decade. U.S. employers added 148,000 workers following a revised 193,000 increase in August that was larger than initially estimated, Labor Department figures showed today. The data was delayed by a 16-day government shutdown that spurred economists to push out expectations for tapering of Federal Reserve stimulus.

“These numbers show we are going to continue to see stimulus from the Fed, there is nothing here to indicate the Fed will taper earlier than first quarter of 2014 now,” Chris Gaffney, senior market strategist at EverBank Wealth Management, said by phone from St. Louis. “The equity markets have been supported by the easy money that the Fed has been pumping to the system. These numbers show the stimulus will continue, therefore it gives a boost to the equity markets.”

Raising Guidance

The median forecast of 93 economists surveyed by Bloomberg called for a 180,000 increase in jobs. Unemployment fell to 7.2 percent, the lowest level since November 2008. The Fed will probably delay the first cut to its quantitative-easing program until March, according to a poll conducted Oct. 17-18. The authority’s last two policy meetings this year are on Oct. 29-30 and Dec. 17-18.

The Fed unexpectedly refrained in September from reducing its monthly purchases of $85 billion of bonds, saying it wanted more evidence of an economic recovery.

Among U.S. stocks moving today, Walt Disney Co., Procter & Gamble Co. and Caterpillar Inc. rose more than 1.6 percent to lead gains in the Dow Jones Industrial Average. (INDU) DuPont Co. advanced 1.2 percent as profit beat analyst estimates amid strength at units that make materials for solar panels and bullet-resistant vests. Apple Inc. erased an early 1.4 percent advance and dropped as much as 2.6 percent before recovering some losses and trading down 0.3 percent.

Apple Event

Apple update its lineup of iPads at an event today, as the company works to remain ahead of rivals in the increasingly crowded tablet market.

Texas Instruments Inc. fell 1.7 percent after the largest analog-chip maker forecast revenue and profit that fell short of analysts’ estimates. Netflix Inc. lost 9.2 percent, reversing an earlier gain of as much as 9.6 percent fueled by third-quarter earnings that exceeded projections. Chief Executive Officer Reed Hastings attributed the rally in the stock, which is up 250 percent this year, to investor “euphoria.”

Earnings Season

The S&P 500’s advance this year has been fueled by the unprecedented Fed stimulus and better-than-estimated corporate earnings. Analysts have raised their forecasts for profits in the third quarter, predicting an average increase of 2.5 percent for all companies in the gauge, according to estimates compiled by Bloomberg. That compares with a 1.7 percent projection at the beginning of the month.

Earnings beat analyst estimates at 73 percent of the 131 companies in the index that have released their results so far in the reporting period, while 53 percent exceeded sales projections, data compiled by Bloomberg show.

The S&P 500 will rise past 1,800 as earnings and the U.S. economy improve, Michael Shaoul, the chairman and chief executive officer of New York-based Marketfield Asset Management LLC, told Bloomberg TV.

“We feel pretty good about equities,” said Shaoul in an interview from New York. “Corporate earnings point to a re-accelerating domestic economy. 1,800 is attainable.” He did not specify a time frame.

The Stoxx 600 has rallied 5.2 percent over nine days, the biggest advance over similar time periods since May. Novartis AG, Europe’s biggest drugmaker by sales, climbed 2 percent today after raising its forecast for the second time this year. Reckitt Benckiser Group Plc (RB/), the maker of Nurofen painkillers and Durex condoms, jumped 5.2 percent after increasing its sales guidance and starting a strategic review of its pharmaceutical unit.

European Movers

Tele2 AB tumbled 12 percent, the most in five months, after the Swedish phone company posted an unexpected loss. Telekom Austria AG sank 5.7 percent after agreeing to pay 1.03 billion euros ($1.4 billion) for wireless spectrum in the alpine nation.

The MSCI Emerging Markets Index rose for the eighth time in nine days, climbing 0.3 percent. The Shanghai Composite Index slid 0.8 percent, led by developers, as a report showed home prices in China’s four major cities jumped the most since January 2011, spurring speculation the government may tighten property curbs. Brazil’s Ibovespa extended its two-day gain to almost 2 percent.

European, Canadian and emerging-markets debt rallied along with U.S. Treasuries. Canada’s benchmark 10-year government yield dropped 7 basis points to 2.48 percent, the lowest level since August.

Spain’s 10-year bond yield dropped 8 basis points to 4.20 percent. Italy’s declined nine basis points to 4.10 percent.

Nickel, aluminum, silver and gold rose at least 1.6 percent to lead gains in 15 of 24 commodities tracked by the S&P GSCI Index. Crude oil for November delivery, which expires today, fell 1.4 percent to $97.80 in New York, the lowest settlement since June 28.

The dollar weakened against all 16 major peers except the Taiwanese dollar, with South Africa’s rand, Mexico’s peso and the Swiss franc strengthening the most. The euro rallied 0.8 percent to $1.3783. The Swiss franc touched its strongest level against the greenback since February 2012.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Aubrey Pringle in New York at apringle1@bloomberg.net

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


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