U.S. Stocks Cap Best Weekly Rally Since January Amid Jobs Data

U.S. stocks had the biggest weekly rally since January, driving the Dow Jones Industrial Average to a record, amid faster-than-forecast jobs growth and speculation that the Federal Reserve will continue to stimulate the economy.

All 10 industry groups in the Standard & Poor’s 500 Index advanced in the week. Citigroup (C) Inc. jumped 11 percent as the lender asked regulators for permission to buy back shares. McDonald’s Corp. climbed 3.2 percent and Gap Inc. rose 7 percent after reporting better-than-estimated February sales. Networking-equipment makers increased after Ciena Corp. posted a surprise quarterly profit.

The S&P 500 rallied 2.2 percent to 1,551.18 over the five days, and is less than 1 percent below its record. The Dow added 307.41 points, or 2.2 percent, to 14,397.07, the highest level in the gauge’s 116-year history. Both measures capped their best weekly gains since Jan. 4.

“The U.S. economy is in a really strong position right now, relative to the globe and relative to where we were three or four years ago,” Jeff Schwarte, a money manager who helps oversee about $282 billion in Des Moines, Iowa, at Principal Global Investors, said in a phone interview. “The Fed will continue with this low growth, high-liquidity market until we have a sustained period of jobs growth.”

Stocks rose every day during the week amid data showing jobless-benefit claims fell to a six-week low and American employment rose by 236,000 jobs last month, exceeding forecasts. Investors shrugged off automatic cuts in U.S. federal spending that went into effect March 1 following a congressional impasse. The cuts, known as sequestration, total $1.2 trillion over the next nine years.

Fed Stimulus

While the jobless rate dropped to 7.7 percent, the lowest since December 2008, it’s still above 6.5 percent, a reason the Fed cited for keeping interest rates near zero. Fed Vice Chairman Janet Yellen said on March 4 the central bank should press on with $85 billion in monthly bond buying while tracking possible costs and risks from the unprecedented program.

More than $10 trillion has been restored to U.S. equity values during the four-year bull market as the S&P 500 (SPX) more than doubled from the bottom in 2009, fueled by better-than-estimated corporate earnings and monetary stimulus from the Fed. The Dow recouped all its losses from the financial crisis in less than 65 months, more than a year faster than the recovery from the Internet bubble.

Record Highs

While the S&P 500 remains 0.9 percent below its 2007 peak, American gauges including the Dow Jones Transportation Average, the Russell 2000 Index (RTY) of smaller companies, the S&P Midcap 400 Index have all reached record highs. By contrast, equity benchmarks in the 45 largest markets are an average of 27 percent below their peaks, data compiled by Bloomberg show.

“It continues the story that the U.S. market is the best place to invest,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $170 billion, said by phone. “The housing market is recovering, the jobs market is recovering and that’s leading to a positive reinforcement.”

Options traders scaled back hedges against equity losses as stocks rallied. The Chicago Board Options Exchange Volatility Index (VIX), which measures the cost of using options as insurance against declines in the S&P 500, tumbled 18 percent to 12.59 for the week, trading near its lowest level since April 2007.

Financials Rally

Financial companies rose the most among 10 S&P 500 groups, surging 3.4 percent. The Fed said that of the 18 largest U.S. banks, all except Ally Financial Inc. could withstand a deep recession and maintain capital above a regulatory minimum.

Citigroup jumped 11 percent, the most since December 2011, to $46.68. The lender’s Tier 1 common ratio, a measure of financial strength, would fall to 8.3 percent in a dire economic scenario, the highest among the six biggest U.S. banks, according to the Fed report. Citigroup asked regulators for permission to buy back $1.2 billion of shares a year after its previous request was rejected.

Bank of America Corp., whose ratio would be at 6.8 percent, according to the Fed, rallied 6.4 percent to $12.07.

McDonald’s added 3.2 percent to $98.71. The world’s largest restaurant chain said sales at stores open at least 13 months fell 1.5 percent in February, less than the average analyst estimate of a 1.6 percent drop compiled by Consensus Metrix, as low prices kept consumers coming to restaurants.

Gap advanced 7 percent to $36.23. The biggest U.S. specialty-apparel retailer posted a 3 percent increase in sales last month, more than the 2.3 percent gain projected by analysts.

Ciena, JDS

Ciena (CIEN) jumped 16 percent to $17.15. The maker of fiber-optic networking equipment reported first-quarter profit of 12 cents a share, compared with a 14-cent loss estimated by analysts on average. JDS Uniphase Corp., another communications-equipment supplier, advanced 10 percent to $15.48.

Boeing Co. climbed 5.1 percent to $81.23. The upgrade of the company’s 777 wide-body jet, a model coveted by airlines and central to Boeing’s strategy to keep its lead over Airbus SAS in twin-aisle airliners, moved closer to board approval with the appointment of Bob Feldmann to lead development of the plane.

Genworth Financial Inc. rallied 15 percent to $9.84. The provider of life insurance and mortgage guaranties is suspending sales of individual long-term care coverage in California as the company works to start replacement offerings with better returns. Chief Executive Officer Tom McInerney is seeking to improve results after fourth-quarter profits at the unit tumbled 75 percent amid low interest rates and rising health-care costs.

Best Buy

Best Buy Co. surged 18 percent to $20.17. Daniel Binder, an analyst with Jefferies Group LLC, raised the stock’s rating to buy from hold, citing the retail’s efforts to cut costs and a potential sale of the company’s business in Europe and Asia.

Freeport-McMoran Copper & Gold Inc. added 5.7 percent to $33.28. The world’s second-largest copper miner may double sales of copper concentrate to China in the next three years as mined production expands, according to Javier Targhetta, the company’s senior vice president of marketing and sales.

TripAdvisor Inc., operator of a travel-research website, jumped 12 percent to $51.03 amid anticipation that a bidding war for display advertising will bolster sales growth. As Priceline.com Inc., the biggest Internet travel site by market value, and its smaller rival Expedia Inc. compete for bookings, they’re spending more for display ads on TripAdvisor, said Tom White, an analyst at Macquarie Capital USA Inc. in New York.

Time Warner Inc. climbed 7.2 percent to $57.46. The media company said it will spin off its magazine business later this year, turning the nine-decade-old publisher of Time, People and Sports Illustrated into a separate publicly held company.

J.C. Penney Co. (JCP) slumped 15 percent to $15.11. Vornado Realty Trust, once its second-biggest shareholder, sold 10 million shares at $16.03 each, almost half of its stake in the struggling department-store chain. The retailer is cutting an additional 2,200 jobs to trim costs as Chief Executive Officer Ron Johnson’s revamp of the company causes sales to plunge.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Jeff Sutherland at jsutherlan13@bloomberg.net

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