U.S. stocks advanced, extending the best start to a year for the Standard & Poor’s 500 Index since 1987, after a report showed that employment growth topped estimates and the jobless rate unexpectedly fell to 8.3 percent.
Bank of America Corp. (BAC), Caterpillar Inc. (CAT) and Alcoa (AA) Inc. rallied at least 3.2 percent to pace gains among companies most- tied to economic growth. The Dow Jones Transportation Average gained 1.2 percent as FedEx Corp. (FDX) climbed 1.9 percent. Genworth Financial Inc. (GNW), a mortgage guarantor and life insurer, surged 14 percent after swinging to a profit. Tyson Foods Inc. (TSN) rose 4.1 percent as earnings at the meat processor beat estimates.
The S&P 500 added 1.5 percent to 1,344.90 at 4 p.m. New York time. The benchmark gauge has rallied for five straight weeks, the longest streak in a year. The Dow Jones Industrial Average gained 156.82 points, or 1.2 percent, to 12,862.23, the highest level since 2008. The Russell 2000 Index of small companies jumped 2.2 percent to 831.11. The Nasdaq Composite Index rose 1.6 percent to 2,905.66, the highest since 2000.
“Spectacular,” Ron Florance, managing director of investment strategy for Wells Fargo Private Bank, said in a telephone interview from Phoenix. His firm manages $169 billion. “It’s a very, very strong jobs number. It shows that companies have confidence that they see global demand growth through their products and services. That will support risk assets.”
Stocks and bond yields jumped as the report fueled optimism the economy is weathering Europe’s debt crisis. The 243,000 increase in payrolls was the most since April and beat all forecasts in a Bloomberg News survey. The unemployment rate fell to the lowest since February 2009. Service industries in the U.S. expanded in January at the fastest pace in almost a year.
The S&P 500 has gained 6.9 percent so far this year, the most since it surged 14 percent over the same period in 1987. The index has recovered after plunging 19 percent between April 29 and Oct. 3 amid better-than estimated economic data and corporate profits. It’s 1.4 percent away from surpassing its peak nine months ago, which would send it to the highest level since June 2008. It has rallied 2.2 percent this week.
Better economic data should help drive solid corporate earnings, said Brad Sorensen at Charles Schwab Corp. Earnings in the S&P 500 are forecast to rise 9 percent this year to $104.68, according to analyst estimates compiled by Bloomberg. At yesterday’s close of $104.68, the index was trading at 12.7 times projected earnings in 2012 and 11.2 times predictions for 2013. It has traded at an average price-earnings ratio of 16.4 since 1954, according to data compiled by Bloomberg.
“It will be a decent year for the stock market,” Sorensen, director of market and sector analysis at San Francisco-based Charles Schwab, said in a telephone interview. His firm has $1.68 trillion in client assets. “Investors are starting to rotate some money into stocks as they become more confident in the economic outlook.”
The Morgan Stanley Cyclical Index (CYC) climbed 2.8 percent amid economic optimism. The KBW Bank Index rallied 3.3 percent. A gauge of homebuilders in S&P indexes gained 5.8 percent.
Bank of America added 5.2 percent to $7.84. Caterpillar, the largest construction and mining-equipment maker, increased 3.3 percent to $113.94. Alcoa, the largest U.S. aluminum producer, climbed 3.3 percent to $10.76. FedEx, an economic bellwether as it moves goods from pharmaceuticals to financial documents, jumped 1.9 percent to $94.54.
Genworth Financial soared 14 percent, the most in the S&P 500, to $9.17. Chief Executive Officer Michael Fraizer has scaled back the retirement-products business to conserve capital as Genworth seeks to maintain sales of U.S. mortgage coverage.
Tyson Foods rose 4.1 percent to $19.38. The meat processor reported first-quarter earnings of 42 cents a share. On average, the analysts surveyed by Bloomberg estimated profit of 34 cents.
Gilead Sciences (GILD) Inc. jumped 11 percent to $54.70. The drugmaker that acquired Pharmasset Inc. last month for its experimental hepatitis C treatments gained after one of the medicines produced positive clinical trial results.
Brocade Communications Systems Inc. (BRCD) rose 1.4 percent to $5.91. Blackstone Group LP (BX) is studying a leveraged buyout of the company, said a person with knowledge of the situation. While Blackstone is in talks with Brocade, which has been seeking a buyer since 2009, reaching a deal may be difficult, said the person.
Estee Lauder Cos. (EL) lost 2.3 percent to $57.48. The maker of Mac cosmetics and Clinique skin care forecast third-quarter earnings of no more than 32 cents a share, before restructuring charges, missing the average analyst estimate of 41 cents.
Wynn Resorts Ltd. (WYNN) slipped 4.8 percent to $114.98. Wynn Macau Ltd.’s full-year profit missed analysts’ estimates as the Hong Kong-listed unit benefited less than its competitor, Sands China Ltd., from surging gambling revenue in the former Portuguese colony.
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