U.S. stocks capped the best two-day rally since October and Treasuries rose as the unemployment rate slid to the lowest since 2008, fueling speculation the economy can weather reductions in monetary stimulus. Crude, gasoline and heating oil led commodity gains.
The Standard & Poor’s 500 Index added 1.3 percent at 4 p.m. in New York, extending its two-day gain to 2.6 percent and sending it higher for the week. The Stoxx Europe 600 Index climbed 0.7 percent. Ten-year Treasury yields dropped two basis points to 2.68 percent, while German yields fell three basis points and Spanish rates slid to an almost eight-year low. The dollar weakened against 13 of 16 major peers. The Turkish lira erased an advance after S&P lowered its outlook on the country. Oil climbed above $100 a barrel for the first time this year.
The 113,000 gain in employment in January trailed the median estimate of 180,000 in a Bloomberg survey, while the jobless rate dropped to 6.6 percent, Labor Department figures showed today. Germany’s top court asked the European Union’s highest tribunal to rule on the legality of the central bank’s debt-buying plan.
“The number wasn’t a disaster,” Phil Orlando, New York-based chief equity market strategist at Federated Investors Inc., which oversees about $376 billion, said in a phone interview. “Folks like me are looking through the headline miss, and recognizing and appreciating that there was some weather factor, but the underlying strength is still there.”
Economists’ forecasts for the January report varied based on their assumptions for effects such as the inclement weather and the expiration of emergency unemployment benefits. The so-called participation rate rose to 63 percent from 62.8 percent even as more people entered the labor force.
“This is a buying opportunity. We get jobs data that is very volatile and we are seeing better economic growth,” Jeffrey Kleintop, chief market strategist at LPL in Boston, which manages about $400 billion, said by phone. “I think the Fed will consider this data, but the Fed has noted that there are other data points they look at.”
The Fed has been scrutinizing employment data to determine the timing and pace of cuts to stimulus. The central bank last week said it will press on with a second reduction to its monthly bond buying, by $10 billion to $65 billion, citing an improvement in the labor market.
The central bank last month reiterated it’ll probably hold the target interest rate near zero “well past the time” the unemployment rate falls below 6.5 percent. Three rounds of stimulus from the Fed have helped push the S&P 500 as much as 173 percent higher from a 12-year low in 2009.
The S&P 500 jumped 1.2 percent yesterday, and today’s gain erased the index’s loss for the week. The gauge is up 0.8 percent for the five days, trimming its 2014 loss to 2.8 percent.
Treasuries rose for the first time in four days, as the jobs report added to speculation that growth in the world’s biggest economy may be faltering.
“The number is disappointing at a time in which the Fed is backed into a corner,” said Guy Haselmann, an interest-rate strategist at Bank of Nova Scotia in New York, one of 21 primary dealers that trade with the U.S. central bank. “They will be unwilling to reverse a direction they just started. The taper is going to continue. The hurdle for not continuing the taper is exceptionally high.”
Five-year note yields fell five basis points to 1.47 percent, erasing the first weekly increase in three weeks. Rates on Treasury three-month bills jumped to a two-month high as an accord suspending the U.S. debt limit expires today.
Congress and President Barack Obama agreed in October to suspend the debt ceiling until the end of today as part of an agreement to end a 16-day partial government shutdown. U.S. Treasury Secretary Jacob J. Lew said U.S. borrowing authority may not last past Feb. 27 and urged Congress to extend the debt ceiling as soon as possible.
Among U.S. stocks moving today, Expedia Inc. jumped 14 percent after the online travel company said increased advertising and hotel-room bookings helped boost sales. Apple Inc. rose 1.4 percent after the company bought back $14 billion of its shares. LinkedIn Corp. (LNKD) slumped 6.2 percent after saying sales growth will slow for a fifth consecutive quarter.
Of the companies in the S&P 500 that have posted results this earnings season, 76 percent beat analysts’ estimates, data compiled by Bloomberg show.
Almost three shares rose for every two that declined in the Stoxx 600, with trading volumes 8.3 percent higher than the 30-day average. The index climbed 0.8 percent this week, after rallying 1.5 percent yesterday as the European Central Bank left interest rates at a record low.
Vedanta Resources Plc advanced 4.3 percent after Bank of America Corp. recommended buying the stock. Basic-resources companies gained 1.6 percent, the most among 19 industry groups in the Stoxx 600.
The Shanghai Composite Index swung to a gain of 0.6 percent as it reopened and a private gauge showed slowing growth in the services industry. A measure of Chinese shares in Hong Kong rose 1.1 percent.
The MSCI Emerging Markets Index climbed 0.9 percent, trimming this year’s decline to 6.4 percent. Shares have slumped this year as China’s economy slows, weak currencies from India to Turkey spur central banks to raise interest rates and the Fed pushes ahead with plans to reduce monetary stimulus. Investors removed more than $12 billion from developing-nation equity funds in the past two weeks, the biggest outflow since January 2008, according to Morgan Stanley, citing data from EPFR Global.
The selloff in developing economies probably isn’t over as sentiment remains negative, Templeton Emerging Markets Group Chairman Mark Mobius said in an interview today. He expects more selling, contrary to Jim O’Neill, creator of the BRIC moniker for the four largest developing economies, who sees the rout fostering a buying opportunity.
The Turkish lira slid 0.5 percent to 2.2207 per dollar, reversing an earlier advance. S&P lowered its outlook on Turkey to negative from stable, citing fiscal and monetary policies as well as governance standards.
Ukraine’s hryvnia strengthened 3.6 percent to 8.547 per dollar after the central bank imposed capital controls. Yields on 10-year Ukraine bonds slid 31 basis points to 9.76 percent, according to generic Bloomberg rates. The central bank announced limits on foreign-currency purchases yesterday after its interventions failed to stem the currency weakening to a five-year low.
Crude oil, gas and heating oil led gains in 19 of 24 commodities tracked by the S&P GSCI Index, sending the gauge up 1.3 percent.
Zinc gained 1.3 percent, rising for a third day. Gold advanced 0.5 percent to $1,262.90 an ounce to extend its weekly gain to 2 percent. West Texas Intermediate oil rose 2.1 percent to settle at $99.88 a barrel and reached $100.21 after the close of floor trading. .
European bonds gained, with Germany’s 10-year yield falling three basis points to 1.66 percent. The rate on Spanish securities slid seven basis points to 3.585 percent, the lowest since March 2006, and Italy’s yield dropped seven basis points to 3.69 percent.
Banks including Goldman Sachs Group Inc. and Royal Bank of Scotland Group Plc said the European Court of Justice was unlikely to block the Outright Monetary Transactions plan.
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