Stocks Rise as Jobs Report Boosts Optimism About Economy

U.S. stocks rose, with the Standard & Poor’s 500 Index gaining a fourth day and the Dow Jones Industrial Average erasing its loss for the year, as better- than-estimated growth in private payrolls eased concern the economy is sliding back into a recession.

JPMorgan Chase & Co., the second-biggest U.S. bank, gained 2.7 percent and Caterpillar Inc. advanced 2.3 percent as private employers climbed 67,000 last month. Monster Worldwide Inc., the online-recruiting company, increased 7 percent. H&R Block Inc. surged 5.8 percent after posting a narrower quarterly loss as the company seeks to win back from online rivals such as Intuit Inc.’s TurboTax. Financial stocks posted the biggest gains among 10 industries in the S&P 500.

The S&P 500 rose 1.3 percent to 1,104.51 at 4 p.m. in New York, extending its weekly gain to 3.8 percent and completing its longest winning streak since July. The Dow increased 127.83 points, or 1.2 percent, to 10,447.93, giving it a 0.2 percent gain for 2010.

“Everybody’s been expecting so much bad news and disappointment, and this is not bad news and it’s not a disappointment,” said Hugh Johnson, who oversees $1.85 billion as chairman of Albany, New York-based Johnson Illington, referring to the jobs report. “It’s very difficult to make the case for a double dip or a renewed recession in the month of August based on these numbers.”

Bullish Signals

The S&P 500 closed above its 50-day moving average yesterday as stocks climbed after economic figures from retail sales to pending home sales helped boost confidence in the economic recovery.

The gauge is approaching the 100-day average at 1,106.27, a bullish signal to investors who watch technical patterns. The index’s 200-day mean price is 1,115.62, about 1 percent above today’s level, according to Bloomberg data. The last time the S&P 500 closed above its average level of the past trading 200 days was on Aug. 10 before stocks fell globally on concern that the economic recovery is in jeopardy.

Index futures jumped after a report showed private payrolls that exclude government agencies climbed 67,000, after a revised 107,000 increase in July that was more than initially estimated. The median estimate of economists surveyed by Bloomberg News called for a gain of 40,000. Overall employment fell 54,000 for a second month and the unemployment rate rose to 9.6 percent as more people entered the labor force.

Fear Abating

“In order for the economy to be self sustaining you have to put people back to work,” said Michael Mullaney, who manages $9 billion at Fiduciary Trust Co. in Boston. “People had been really fearing that there was going to be a chance of a double dip and that seems to be abating right now. This last week or so you’re starting to get some positive surprises on the economic data so that lends support to the market.”

Stocks pared gains after the Institute for Supply Management’s index of U.S. non-manufacturing businesses, which covers about 90 percent of the economy, fell to 51.5 in August from 54.3 the prior month. A reading of 50 is the dividing line between expansion and contraction.

Economists projected the Tempe, Arizona-based ISM’s group’s index would fall to 53.2, according to the median of 67 forecasts. Estimates ranged from 51 to 55.5.

No Gangbuster

“The service sector has been struggling more than manufacturing,” said Michael Dueker, the Tacoma, Washington- based head economist at Russell Investments, which manages $140 billion. “It’s not a gangbuster change of events, but it’s confirming that although we won’t have a double-dip we will have a very slow recovery.”

JPMorgan advanced 2.7 percent to $39.17 and Goldman Sachs Group Inc. increased 5.4 percent to $147.29 as financial companies in the S&P 500 rallied 2.2 percent.

Caterpillar, the world’s largest maker of construction equipment, rose 2.3 percent to $70.08. General Electric Co., the world’s biggest maker of jet engines, locomotives and medical- imaging equipment, gained 1.6 percent to $15.39.

Monster Worldwide climbed 7 percent to $12.33 for the biggest gain the S&P 500. Providers of temporary employees also advanced after the Labor Department’s jobs report. Robert Half International Inc. rose 4.5 percent to $24.03. TrueBlue Inc. gained 18 percent to $13.70. SFN Group Inc. increased 9.6 percent to $6.60.

3M’s M&A Appetite

3M Co. rose 2 percent to $83.48. The maker of stethoscopes and sandpaper is interested in acquisitions in health care and the “industrial space,” Chief Executive Officer George Buckley said.

H&R Block climbed 5.8 percent to $13.30. The company reported a quarterly loss from continuing operations of $127.6 million, or 40 cents a share. That compares with $130.6 million, or 39 cents, in the same period last year. Chief Executive Officer Alan Bennett, who recently rejoined the company, is working to reverse customer losses after the company missed its fiscal 2010 forecast earlier this year.

Take-Two Interactive Software Inc. climbed 7.3 percent to $9.50 after the video-game publisher reported an unexpected third-quarter profit of 28 cents a share and boosted its earnings outlook on sales of the newest release, “Red Dead Redemption.”

Celldex Therapeutics Inc. tumbled 26 percent to $3.53 after slumping as much as 39 percent, the most intraday in eight years. Pfizer Inc. is pulling out of an agreement with Celldex to fund the development of an experimental brain tumor vaccine. The vaccine is “no longer a strategic priority of Pfizer,” which will return the rights to the therapy, Celldex said.

US Airways Group Inc. gained 3.3 percent to $9.97. The company said its August passenger revenue per available seat mile increased an estimated 15 percent.

To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.

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