S&P 500 Climbs to 5-Year High as Treasuries Erase Drop
U.S. stocks rose, sending the Standard & Poor’s 500 Index to a five-year high, as government data showed employers added more workers while the jobless rate held at a level that’s unlikely to hasten the end of Federal Reserve stimulus. Treasuries erased early losses.
The S&P 500 added 0.5 percent to 1,466.47 at 4 p.m. in New York to extend a weekly gain to 4.6 percent and send it to its best closing level since December 2007. The Stoxx Europe 600 Index added 0.4 percent, closing at the highest since February 2011. The Dollar Index increased 0.1 percent after earlier jumping as much as 0.6 percent. Treasury 10-year yields fell one basis point to 1.90 percent after rising for three days and touching the highest since April earlier. Silver and gold slid.
U.S. employers added workers in December at about the same pace as in the prior month even as lawmakers struggled to reach a budget deal, according to the Labor Department’s monthly payrolls report. Fed policy makers said yesterday they will probably end their $85 billion monthly bond purchases, known as quantitative easing, in 2013, according to minutes of their Dec. 11-12 meeting released yesterday.
The jobs report “reinforces the view that the labor market is healing but at a very slow pace,” Joseph Tanious, a New York-based global market strategist for JPMorgan Funds, which oversees $400 billion, said by telephone. “It’s a good report that suggests the economy is healing but it’s not so good that the Fed might pull out of QE. It’s been a shortened week but jam packed and everybody’s still digesting everything.”
The S&P 500 retreated 0.2 percent yesterday after the release of the Fed minutes. The gauge soared 2.5 percent on Jan. 2 after Republicans and Democrats agreed on a compromise budget that avoided the so-called fiscal cliff of sweeping tax increases and spending cuts.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, slid 5 percent today to a four-month low of 13.83. The benchmark gauge of U.S. equity options tumbled 39 percent since Dec. 28, its biggest weekly loss on record.
Commodity, industrial and financial companies helped lead the market’s gain today, with Walt Disney Co., Johnson & Johnson and JPMorgan Chase & Co. climbing at least 1.8 percent for the biggest gains in the Dow Jones Industrial Average.
Eli Lilly & Co. jumped 3.7 percent as the drugmaker forecast 2013 earnings above analyst expectations. Citigroup Inc. advanced 2.5 percent after Goldman Sachs Group Inc. added the bank to its conviction buy list. Avon Products Inc. gained 3.2 percent after Bank of America Corp. raised its rating on the stock.
Apple Inc. (AAPL) slumped 2.8 percent, the most since Dec. 14. Deutsche Bank AG said supply-chain movements suggest iPhone and iPad production may be declining. Technology shares had the only decline among the 10 main S&P 500 groups.
S&P 500 futures extended gains before the open of exchanges in New York after the jobs data were released. Payrolls rose by 155,000 workers last month following a revised 161,000 advance in November that was more than initially estimated, Labor Department figures showed today. The median estimate of 82 economists surveyed by Bloomberg called for an increase of 152,000. The unemployment rate held at 7.8 percent, matching the lowest since December 2008.
“At 7.8, that tells us we still have an unemployment problem and the Fed will still be engaged,” Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said on Bloomberg Television.
Among European stocks, Fresnillo Plc (FRES), the world’s biggest primary silver producer, sank 4 percent in London trading as UBS AG downgraded the shares and the precious metal retreated. ThromboGenics NV jumped 3.3 percent after confirming the launch date for its Jetrea vision restoration treatment. Fresnillo Plc, the world’s biggest primary silver producer, slid 4 percent after UBS AG downgraded the shares. Randgold Resources Ltd. lost 4 percent as the price of the metal fell.
The U.S. currency climbed as much as 1.3 percent to 88.41 yen, the strongest level since July 2010. The euro was up 0.2 percent at $1.3080 after losing 0.4 percent earlier to the weakest level in three weeks.
The yen weakened at least 0.7 percent against all major peers and is set for an eighth weekly drop versus the U.S. currency, the longest run of losses since 1989, amid speculation the government will add more monetary stimulus.
The S&P GSCI gauge of 24 commodities dropped 0.5 percent as silver, lead, aluminum, zinc and gold lost at least 1 percent to help lead declines. Oil capped its biggest weekly gain in three months, increasing 17 cents to $93.09 and extending its gain since Dec. 28 to 2.5 percent.
The MSCI Emerging Markets Index fell 0.4 percent, declining for the first time in 10 days to snap the longest rally in 14 months. The gauge has climbed about 10 percent since the Fed announced a third round of stimulus on Sept. 13. The Shanghai Composite Index rose 0.4 percent in the first day of trading this year, while Brazil’s Bovespa slipped 1.3 percent.
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