Stocks and the dollar rose, while Treasuries fell, as growth in U.S. jobs boosted optimism in the world’s largest economy. Equities pared gains as an industry group ruled that Greece’s debt restructuring will trigger payouts on $3 billion in default insurance.
The Standard & Poor’s 500 Index increased 0.4 percent to 1,370.87 at 4 p.m. in New York, leaving it up 0.1 percent for the week. The euro lost 1.2 percent to $1.3119. The yield on the 10-year Treasury rose two basis points to 2.03 percent. Italy’s 10-year bond yield increased three basis points to 4.84 percent, erasing earlier declines. Copper rallied 1.8 percent, while oil increased 0.8 percent to $107.40 a barrel.
The U.S. added 227,000 jobs last month, topping the median economist forecast for a 210,000 rise. Greece’s debt swap, the biggest sovereign restructuring in history, allowed the nation to activate collective action clauses forcing investors to take losses. The International Swaps & Derivatives Association said the deal will be considered a “credit event” and default swaps on the debt may now be settled.
“We can sit back because the U.S. is not going into a recession even though Europe is in a recession,” Stephen Wood, the New York-based chief market strategist for Russell Investments, said in a telephone interview. His firm oversees $137.6 billion. “These jobs numbers are not fantastic, but they are consistent with that slow, non-recessionary economic growth forecast.”
Bull Market Anniversary
Today marked the three-year anniversary of the bull market in U.S. stocks that followed the global financial crisis. The S&P 500 has rallied 103 percent from its 12-year low on March 9, 2009, and is still down about 12 percent from its 2007 record. The index has advanced for four straight weeks and is up 9 percent so far in 2012, its best start to a year since 1998.
JPMorgan Chase & Co., Travelers Cos., DuPont Co. and Intel Corp. rose at least 0.8 percent to lead gains in the Dow Jones Industrial Average, which climbed 14.08 points to 12,922.02. Financial and consumer-discretionary shares led gains among the 10 main industry groups in the S&P 500, rising at least 0.5 percent.
Starbucks Corp. (SBUX) gained 2.9 percent on plans to introduce a new single-cup coffee brewer, sending shares of Green Mountain Coffee Roasters Inc., maker of the Keurig brewers, down 16 percent. Texas Instruments Inc. (TXN), the largest maker of analog semiconductors, fell 1 percent after cutting sales and profit forecasts.
The dollar strengthened against 13 of 16 major peers, rising 1 percent versus the yen. The Dollar Index, a gauge of the currency against six major counterparts, climbed 1.1 percent, the most intraday in almost two months. Today’s jobs data fueled speculation that the American economy is improving enough that the Federal Reserve will not see a need to undertake a third round of bond purchases known as quantitative easing, or QE3.
“It’s good news for the U.S. economy, arguably good enough news that prospects of QE3 start to become much more remote,” said Greg Anderson, a senior currency strategist at Citigroup Inc. in New York. “The knee-jerk dollar strength was across the board.”
Two shares rose for each that declined in the Stoxx Europe 600 Index (SXXP). London Stock Exchange Group Plc (LSE) rallied 6.4 percent, the most since June, after agreeing to buy a majority stake in LCH.Clearnet Group Ltd. for 463 million euros ($612 million). Lagardere SCA (MMB), France’s largest publisher, tumbled 6.1 percent after its 2012 outlook prompted analysts to cut profit targets.
Among major national benchmarks in Europe, the FTSE-100 Index added 0.5 percent and Germany’s DAX increased 0.7 percent. The euro weakened versus 10 of 16 major peers.
Greek government bonds due to be issued after the nation’s debt swap is completed were priced at less than 30 percent of face amount, signaling concern the country will struggle to repay its revised obligations. The 2 percent bonds maturing in February 2023 were bid at 25.5 cents on the euro at 4:25 p.m. London time, BNP Paribas SA data on Bloomberg showed. They were offered at 26 cents, according to Jefferies Group Inc. That left the yield on the securities bid at 19.7 percent and offered at 19.42 percent, the data showed.
Greece’s debt swap was met with a 95.7 percent participation rate among investors. A total 4,323 credit-default swap contracts can now be settled after ISDA’s determinations committee ruled the use of collective action clauses is a restructuring credit event. Before the ruling, Greek swaps rose to a record $7.68 million in advance and $100,000 annually to insure $10 million of debt for five years.
Fitch Ratings downgraded Greece to “restricted default” from C after the debt-swap announcement. The “sanctity” of bondholders’ contracts has been diminished by Greece’s pushing through the restructuring, according to Pacific Investment Management Co.’s Bill Gross.
“The rules have been changed here,” Gross, co-chief investment officer at Pimco, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “The sanctity of their contracts is certainly lessened. Bondholders have that to look forward to going into the future.”
The MSCI Emerging Markets Index (MXEF) advanced 0.7 percent, paring this week’s drop to 1.9 percent. The Shanghai Composite (SHCOMP) and the Hang Seng China Enterprises Index (HSCEI) of Chinese stocks listed in Hong Kong both advanced 0.8 percent after a report showed consumer prices rose at the slowest pace in almost two years. The BUX Index (BUX) jumped 1.2 percent in Budapest. The BSE India Sensitive Index (SENSEX) rose 2.1 percent as trading resumed after yesterday’s holiday.
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