U.S. Stocks End Little Changed to Cap Best Week Since March 2009

U.S. stocks (SPX) were little changed, after wiping out an early rally, as a drop in the jobless rate to a two-year low wasn’t enough to extend the biggest weekly advance since March 2009 for the Standard & Poor’s 500 Index.

Equities headed lower as the largest U.S. companies including Caterpillar Inc. (CAT) reversed their gains. Tenet Healthcare Corp. (THC) and Boston Scientific Corp. (BSX) lost at least 6.8 percent, leading declines in health-care companies. JPMorgan Chase & Co. and Morgan Stanley (MS) climbed at least 6.1 percent, as financial companies (SPXL1) had the biggest rise among S&P 500 groups.

The S&P 500 dropped less than 0.1 percent to 1,244.28 as of 4 p.m. New York time, after rising as much as 1.3 percent. The index rallied 7.4 this week. The Dow Jones Industrial Average lost 0.61 points, or less than 0.1 percent, to 12,019.42. The Russell 2000 Index, a measure of the smallest U.S. companies, jumped 0.6 percent to 735.02.

“It’s another incremental step in the right direction for the labor market, but we’re still not out of the rut we’ve been in,” John Canally, who helps oversee about $340 billion as an economist and investment strategist at LPL Financial Corp. in Boston, said in a telephone interview. “More than anything this is still about Europe.”

The benchmark index for American equities has trimmed its decline for 2011 to 1.1 percent after rebounding 13 percent from its low for the year on Oct. 3. Improving U.S. economic data has helped alleviate concern that the world’s largest economy will relapse into a recession as Europe’s debt crisis threatens to derail the recovery.

Economic Surprise

The Citigroup Economic Surprise Index for the U.S. has risen to the highest level since March 9. The gauge, which measures the rate at which data is beating or missing economist forecasts, reached 85.7 today and has rebounded from a more-than two-year low of minus 117.2 in June.

Today’s jobs data showed that payrolls climbed 120,000, with more than half the hiring coming from retailers and temporary help agencies, after a revised 100,000 rise in October that was more than initially estimated. The median estimate in a Bloomberg News survey called for a gain of 125,000. The jobless rate declined to 8.6 percent, the lowest since March 2009, from 9 percent, Labor Department figures showed.

“The market anticipated stronger-than-expected data and it was already discounted,” said Barry Knapp, the New York-based head of U.S. equity strategy at Barclays Plc, said in a telephone interview. “What typically happens with these macro surprises is they get to a point where expectations have moved up and you’re no longer surprising the market.”

More Resources

The International Monetary Fund said today it will need more resources to fight Europe’s debt crisis if market conditions worsen. The S&P 500 has rallied this week as the Federal Reserve and five other central banks lowered the cost of dollar funding and China cut the proportion that banks need to hold as reserve capital.

Equity futures rose earlier following a report that as much as 200 billion euros ($270 billion) of national central bank loans may be channeled through the IMF. Germany and France are pushing for closer economic ties among euro-area nations and tougher enforcement of budget rules to counter the region’s debt crisis.

Financial stocks posted the largest gains out of 10 groups in the S&P 500, climbing 1.4 percent. JPMorgan (JPM) surged 6.1 percent, the biggest rise in the Dow, to $32.33, while Morgan Stanley rallied 7 percent to $15.52. Citigroup Inc. (C) jumped 4.4 percent to $28.17 and Goldman Sachs Group Inc. (GS) added 3 percent to $97.25.

Reversing Gains

Caterpillar, the world’s largest construction and mining- equipment maker, slid 0.6 percent to $96.29, after rallying as much as 1.2 percent. Chevron Corp. (CVX) slumped 0.1 percent to $101.69, after rising as much as 1.3 percent.

Western Digital jumped 7.5 percent, the most in the S&P 500, to $31.44. The disk-drive maker raised its quarterly revenue forecast (WDC) after sales rebounded from a flood in Thailand that devastated factories and constrained supplies.

Hospital and medical device stocks tumbled after a report that insurers who handle Medicare payments in 11 states will perform audits on hospital stays related to heart and orthopedic procedures. Hospitals will have to wait 30 to 60 days while hospital records are reviewed to determine whether procedures performed during the stay were medically necessary, the Wells Fargo Securities note said today.

Health-care companies posted the biggest losses as a group today, falling 1.3 percent. Tenet Healthcare plunged 11 percent to $4.18. Boston Scientific erased 6.8 percent to $5.50.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

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

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