U.S. Stocks Rise as Service, Jobs Data Offset China

Oct. 3 (Bloomberg) -- Bloomberg’s Deirdre Bolton, Josh Lipton and Adam Johnson report on today’s ten most important stocks including Family Dollar, Netflix and Hewlett-Packard. (Source: Bloomberg)

U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a third day, as better- than-forecast growth in American employment and service industries offset concern about China’s economy.

PulteGroup Inc. (PHM) led homebuilders to the biggest rally since July as mortgage applications climbed to the highest level in more than three years. Best Buy Co. jumped 4.7 percent on a report the retailer’s founder and buyout firms are scrutinizing the company’s finances. Hewlett-Packard Co. (HPQ) tumbled 13 percent after the computer maker forecast fiscal 2013 profit that missed estimates as Chief Executive Officer Meg Whitman said a turnaround effort won’t happen any time soon.

The S&P 500 rose 0.4 percent to 1,450.99 at 4 p.m. in New York. The benchmark index for American equities has climbed 0.7 percent in three days. The Dow Jones Industrial Average added 12.25 points, or 0.1 percent, to 13,494.61 today. Volume for exchange-listed stocks in the U.S. was 6.2 billion shares, or 4.4 percent above the three-month average.

“Today’s data is saying very clearly that we’re not heading to a recession,” Thomas Sowanick, chief investment officer of Omnivest Group LLC, which oversees $3 billion in Princeton, New Jersey, said in a phone interview. “Investors are getting a little bit more optimistic about the future,” he said. Weak data from China “increased the likelihood that the Chinese central bank or some other mechanism is focusing on providing liquidity to the economy.”

Employment Report

U.S. equities rose after ADP Employer Services said companies added 162,000 jobs last month, topping the median forecast of 38 economists surveyed by Bloomberg for a 140,000 advance. Service industries in the U.S. expanded more than forecast in September.

The data come two days before the Labor Department’s September payrolls report is published. The jobless rate in the U.S. probably rose to 8.2 percent last month from 8.1 percent in August, economists said. Payrolls increased by 115,000 in September, less than the 139,000 average over the first eight months of the year, the report may also show.

Over the two years ended August, ADP’s initial release has understated or overstated the Labor Department’s initial private payroll figure by an average of 66,000, according to Bloomberg calculations. The average miss by economists in the Bloomberg survey over the same period was 58,000.

‘Massive Liquidity’

“The ADP report was better than estimated, but it hasn’t been a good indicator of the official jobs data and the market is going to want confirmation from the government report on Friday,” Stephen Wood, the New York-based chief market strategist for North America for Russell Investments which oversees $152 billion, said in a phone interview.

Stocks retreated across Europe and Asia earlier today as Chinese services industries expanded at the weakest pace since at least March 2011 in September, while euro-area services and manufacturing output contracted for an eighth month.

The S&P 500 rallied 15 percent from the June 1 low to a four-year high on Sept. 14 amid better-than-expected earnings and optimism that central banks around the world will take action to spur growth.

Companies will start reporting third-quarter profits, with Alcoa Inc. unofficially kicking off the earnings season on Oct. 9. Profits for S&P 500 companies are forecast to decline 2 percent last quarter, according to data compiled by Bloomberg.

‘Weaker Earnings’

“There has been an ongoing tug of war as to whether or not the liquidity coming into the markets can counteract perhaps weaker earnings,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial, which oversees $943 billion, said in a phone interview.

Eight out of the 10 S&P 500 industry groups advanced today. Phone companies, consumer-discretionary and financial stocks rose the most, climbing at least 0.8 percent. Commodity shares were the only losers as a decline in oil helped send energy shares down 1.1 percent.

An S&P gauge of homebuilders rallied 5.2 percent, its biggest gain since July 26, as all of its 11 members advanced. The Mortgage Bankers Association’s index jumped 16.6 percent in the period ended Sept. 28 from the prior week, the Washington- based group said. Purchase applications rose 3.9 percent and refinancing surged 19.6 percent.

PulteGroup, the largest U.S. homebuilder by revenue, jumped 6 percent to $16.50. D.R. Horton Inc. gained 6.2 percent to $21.99, while Lennar Corp. (LEN) climbed 6.9 percent to $37.41.

Best Buy

Best Buy (BBY) rose 4.7 percent to $17.76 after Reuters reported that founder Richard Schulze and at least four private-equity firms are looking at the company’s finances with a view to a possible $11 billion buyout. The newswire cited unidentified people familiar with the matter.

Family Dollar Stores Inc. (FDO) climbed 3.9 percent to $68.56. The discount retailer forecast fiscal 2013 earnings of $4.10 to $4.40 a share. The mid-point of the projection was $4.25, above the average analyst estimate of $4.22 in a Bloomberg survey.

Netflix Inc. (NFLX) jumped 11 percent, the most since July 5, to $62.58, after a Citigroup Inc. analyst said the video- subscription service has improved its customer satisfaction. A Citigroup survey last month found that 48 percent of customers are “very or extremely satisfied,” compared with about 45 percent in the first and second quarter, according to a note by analyst Mark Mahaney yesterday.

Hewlett-Packard (HPQ) sank 13 percent to $14.91, the lowest level since 2002. Earnings excluding some items for the year, which begins next month, will be $3.40 to $3.60 a share, the company said. Analysts on average had estimated profit of $4.16 a share, according to data compiled by Bloomberg.

‘Rebuild Year’

Whitman said it will take longer than she expected to orchestrate a turnaround at the struggling computer maker. Next year will be a “fix and rebuild year,” she said.

Dell Inc. (DELL), a rival computer maker, slid 4.8 percent to $9.43.

Monsanto Co. (MON) fell 2.2 percent to $88.59. The world’s largest seed company forecast 2013 earnings of no more than $4.32 a share, below the average analyst projection of $4.38 a share, according to data compiled by Bloomberg.

MetroPCS Communications Inc. (PCS) slid 9.8 percent to $12.24. Deutsche Telekom AG, Germany’s largest phone company, will own 74 percent of a new U.S. mobile operator combining its T-Mobile USA unit with MetroPCS. MetroPCS shareholders will get $1.5 billion in cash as part of the deal, the companies said. Shares of MetroPCS rallied 18 percent yesterday after Bloomberg reported the planned transaction.

Sprint Nextel Corp. (S), the third-largest U.S. wireless carrier, climbed 6.1 percent to $5.20, after tumbling 5.4 percent yesterday.

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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