Bloomberg News

Dow Average Tops 17,000 as Payrolls Rise Amid ECB Plans

July 03, 2014

The Dow Jones Industrial Average (INDU) climbed above 17,000 for the first time as data showed employers added more workers than projected in June and the European Central Bank disclosed details of its stimulus plans.

Goldman Sachs Group Inc. and MetLife Inc. advanced at least 1.5 percent, pacing gains among banks and insurance companies. Paccar (PCAR:US) Inc. added 5.4 percent amid speculation that the maker of Kenworth and Peterbilt trucks may receive takeover interest from Volkswagen AG. PetSmart (PETM:US) Inc. jumped 13 percent after Jana Partners LLC disclosed a new activist stake. Lululemon Athletica Inc. gained 2.9 percent after a report that the yoga-wear company has explored a buyout by a private-equity firm.

The Dow gained 92.02 points, or 0.5 percent, to 17,068.26 as equities markets close at 1 p.m. today before the Independence Day holiday. The Standard & Poor’s 500 Index (SPX) rose 0.6 percent to a record 1,985.44. About 3.5 billion shares changed hands on exchanges. The yield on 10-year Treasuries climbed two basis points to 2.65 percent.

Related:

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  • Opinion: Reading the Jobs Report's Tea Leaves

“This is a pretty strong report,” said Jim Paulsen, chief investment strategist at San Francisco-based Wells Capital Management, in a phone interview. “This is stuff that is going to lead to upward revisions of second quarter growth rates and it starts off the third quarter in a real positive momentum place.”

Jobs Report

The addition of 288,000 jobs followed a 224,000 gain the prior month that was bigger than previously estimated, Labor Department figures showed today in Washington. The median forecast in a Bloomberg survey of economists called for a 215,000 advance. The jobless rate is the lowest since September 2008. The number of long-term unemployed fell to 3.1 million, showing they’re having greater success finding work.

It took the Dow 227 days to cross the 17,000 mark after surpassing 16,000 for the first time on Nov. 18. Caterpillar Inc., the world’s largest maker of construction and mining equipment, Walt Disney Co., the biggest entertainment company, and computer-chip maker Intel Corp., led the advance, rising more than 20 percent.

Benchmark indexes are at record levels as stocks extended a rebound from a selloff earlier this year that started with biotechnology and small-cap stocks. The S&P 500 has rallied 9.4 percent since reaching a two-month low in April as central bank stimulus spread from Europe to Japan and the U.S.

Central Banks

Fed Chair Janet Yellen said last month that accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth. The Fed has kept its benchmark rate near zero since December 2008.

ECB President Mario Draghi reiterated today that he’ll keep interest rates low as officials try to revive the region’s economy with a new round of emergency measures.

Draghi gave some details today on the new targeted-loan program that includes lending to banks under the condition they lend the money on to households and companies. He estimated that banks could take up as much as 1 trillion euros ($1.36 trillion) in the two initial tenders and a series of quarterly auctions.

“I’m confident that banks will quickly understand that even though it’s complicated, it’s also quite attractive,” he said.

“All eyes should be focused not on the jobs number, but on what Mario Draghi says,” Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $160 billion, said in a phone interview.

Low Volatility

The Chicago Board Options Exchange Volatility Index (VIX) declined 4.7 percent to 10.32. The gauge, known as the VIX, is at its lowest level since February 2007.

Nine of 10 main industries in the S&P 500 advanced. Industrial, consumer-discretionary and financial firms were the biggest gainers, rallying at least 0.8 percent.

Life insurers like Lincoln National Corp. and MetLife benefit from climbing bond yields, which allow them to invest clients’ premiums and maturing securities at higher interest rates. MetLife added 2 percent to $57.22 and Lincoln National increased 2.1 percent to $53.28. Goldman Sachs added 1.5 percent to $169.46 for the biggest advance in the Dow.

Paccar rose 5.4 percent to $67.25. Volkswagen spokeswoman Christine Ritz said by telephone that the largest European carmaker “clearly denies” an interest in bidding for the Bellevue, Washington-based company. Sanford C. Bernstein & Co. analyst Max Warburton said in a note that Wolfgang Bernhard, chief of the truck unit at Daimler AG, said at an event yesterday with analysts that Volkswagen may bid for Paccar.

Takeover Talks

Lorillard Inc. climbed 5.3 percent to $64.41. The fourth-largest U.S. tobacco seller may be taken over by Reynolds American Inc. within weeks, CNBC reported, citing people it didn’t identify. Reynolds added 2.3 percent to $61.56.

PetSmart jumped 13 percent to $67.28. Jana, the $10 billion hedge-fund firm run by Barry Rosenstein and known for pushing corporate managements to make changes, acquired about 9.9 percent of PetSmart in stock and options, and “expects to have discussions” with management, the board and other investors, according to a regulatory filing.

Lululemon rose 2.9 percent to $42.60. Advisers to founder Chip Wilson have been talking to private-equity firms, including Leonard Green & Partners LP, about taking the company private, the Wall Street Journal reported, citing people familiar with the situation. The newspaper reported on June 22 that the Vancouver-based company is working with Goldman Sachs Group Inc. on options including shaking up the board and partnering with a buyout firm.

Cree Inc. added 5 percent to $52.83. The maker of energy-efficient lighting products was raised to outperform, the equivalent of a buy, from market perform, or hold, at Oppenheimer & Co.

Utility companies were the only losers among 10 S&P 500 industries, falling 1.1 percent. The group has dropped 4 percent over three days, the most since June 2013, amid concern rising bond yields will erode demand for equity income. Utilities offer a dividend yield of 3.7 percent, trailing only telephone stocks.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

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


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Companies Mentioned

  • PCAR
    (PACCAR Inc)
    • $69.24 USD
    • -0.30
    • -0.43%
  • PETM
    (PetSmart Inc)
    • $81.31 USD
    • -0.13
    • -0.16%
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