U.S. Stocks Advance as Job Data, Retail Sales Bolster Economic Optimism

U.S. stocks jumped, sending the Standard & Poor’s 500 Index close to a three-year high, as retail and job market data bolstered confidence in the economy.

Target Corp. (TGT), the second-largest U.S. discount retailer, and Kohl’s Corp. (KSS) rose at least 6.6 percent as June retail sales surpassed analysts’ projections. Urban Outfitters Inc. (URBN) rallied 6 percent after Morgan Stanley recommended investors buy the shares. JPMorgan Chase & Co. (JPM) climbed 1.9 percent as banking shares soared.

The S&P 500 Index (SPX) climbed 1.1 percent to 1,353.22 at 4 p.m. in New York, its highest closing level since May 10. The Dow Jones Industrial Average rose 93.47 points, or 0.7 percent, to 12,719.49, as a report by ADP Employer Services showed U.S. companies added more jobs than forecast in June. Volume on U.S. exchanges totaled about 6.8 billion at 4:30 p.m., 4 percent less than the three-month average through yesterday.

“We’re starting to cycle through the list of issues that have been on investors’ minds,” said Christopher Blum, New York-based chief investment officer for the U.S. behavioral finance group at JPMorgan Asset Management, which oversees $1.9 trillion in assets. “Economic data is coming in better than expected, and certainly the beat on the jobs number today came earlier than most investors had expected.”

The S&P 500 has climbed 6.7 percent over the past eight days, with last week’s gain the biggest since July 2009. The index is about 10 points shy of a three-year high reached April 29. Through June 24, U.S. equities had fallen for seven of the previous eight weeks on concern that the European debt crisis would spread and the U.S. economy slow. The index still has gained 7.6 percent for the year amid better-than-expected earnings and government stimulus measures.

Job Reports

Equities rose today as figures from ADP showed companies in the U.S. added 157,000 workers to their payrolls in June. The median estimate of economists surveyed by Bloomberg News called for an advance of 70,000. The data comes before the government’s June payrolls report tomorrow.

Separate data from the Labor Department showed jobless claims fell by 14,000 to 418,000 last week, compared with the median forecast of economists for a drop to 420,000. The number of people on unemployment benefit rolls and those getting extended payments also declined.

“These kind of employment numbers are supportive for the market,” said Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $355 billion. “Unemployment is the single most dominant statistic in our national debate right now, it shadows all the other economic and political debates and it shapes the sentiment which surrounds the stock market.”

Commodity Producers

Measures of fuel and materials companies climbed 1.4 percent and 1.5 percent, respectively, while the Morgan Stanley Cyclical Index added 1.3 percent on speculation that the U.S. labor market may be stronger, indicating that job growth could accelerate in the second half of the year and demand for commodities will improve.

Investors next week also will be turning their attention to second-quarter earnings. The season starts July 11 with Alcoa Inc., the first Dow company to release results. Corporate earnings are forecast to have grown by 13 percent, according to estimates compiled by Bloomberg.

Retailers in the S&P 500 rallied 2.4 percent today to a record. Sales reports indicated that shoppers took advantage of discounts that retailers implemented in June to clear out inventory and make room for back-to-school merchandise. Lower gas prices and warmer temperatures also enticed consumers. Gas prices in the U.S. have declined 10 percent since a high of $3.99 a gallon on May 4, according to AAA.

Retailers Surge

Target jumped 6.7 percent to $51.67 while Kohl’s, the department-store chain that’s been in business since 1962, soared 7.1 percent to $55.78.

Limited Brands Inc., operator of the Victoria’s Secret chain, rose 2.7 percent to $40.36 after posting a gain of 12 percent in same-store sales for June, surpassing the 4.4 percent average of analysts’ estimates compiled by Retail Metrics Inc.

Urban Outfitters, a clothing retailer, climbed 6 percent to $32.58 after Morgan Stanley raised the stock to “overweight” from “equal weight.”

Financial companies rose 1.6 percent, the biggest gain among 10 groups in the S&P 500. JPMorgan climbed 1.9 percent to $41.32, for the third-largest increase in the Dow. Wells Fargo & Co. (WFC) added 1.9 percent to $28.66, Citigroup Inc. (C) advanced 1.5 percent to $42.63 and Bank of America Corp. jumped 1.7 percent to $10.92.

Faulty Foreclosures

Bank of America, JPMorgan and three other U.S. mortgage servicers are in advanced talks to resolve state and federal claims over faulty foreclosures, according to two people briefed on the matter. Negotiators tentatively set a July 13 target for a settlement, which may exceed $20 billion, the people said.

The New York Post sent bank stocks lower yesterday after reporting that the settlement’s total value might reach $60 billion, citing unidentified people close to the discussions. The Post corrected its report today, saying the amount might reach $25 billion.

Seagate Technology Plc (STX) rose 2 percent to $16.64. The world’s largest maker of computer disk drives was raised to “overweight” from “underweight” at JPMorgan.

Affymetrix Inc. (AFFX) tumbled 18 percent to $6.59. The producer of genomic-analysis technology forecast second-quarter sales of as little as $64 million, compared with the average analyst estimate of $74.7 million.

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

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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