- Job gains further cement expectations for Fed rate move
- Oil tumbles as OPEC members balk at cutting production
U.S. stocks rallied, with the Standard & Poor’s 500 Index recovering from its steepest drop in two months amid its strongest gain in nearly three, as jobs data bolstered confidence that the economy is strong enough to withstand higher borrowing costs.
Technology and financial shares paced Friday’s advance, with Apple Inc., Microsoft Corp. and JPMorgan Chase & Co. all rising more than 3.1 percent, to cap a whipsaw week of trading that drove the benchmark index to moves of more than 1 percent in four straight sessions.
The S&P 500 climbed 2.1 percent to 2,091.69 at 4 p.m. in New York, its strongest gain since Sept. 8. The gauge posted its ninth weekly advance in the last 10. The Dow Jones Industrial Average gained 369.96 points, or 2.1 percent, to 17,847.63, erasing its weekly decline. The Nasdaq Composite Index added 2.1 percent. A measure of volatility plunged the most in two years. About 7.7 billion shares traded hands on U.S. exchanges, 8.7 percent above the three-month average.
“This number plus last month’s report really wipes out the stench from the miss we saw in August and September,” Phil Orlando, who helps oversee $360 billion as chief equity-market strategist at Federated Investors Inc. in New York., said by phone. “This number ought to clinch it for the Fed in terms of liftoff in December. We should have a spike after yesterday’s overreaction on the euro and Draghi.”
Stocks extended gains in afternoon trading after European Central Bank President Mario Draghi said the bank has the power to act to the extent it sees necessary to defend its inflation mandate, and is willing to use it. His comments came a day after the ECB unveiled stimulus measures that disappointed investors, sparking a selloff in Europe that spread to the U.S.
Friday’s rally began after a report showed a larger-than-forecast 211,000 increase in November U.S. payrolls, following a 298,000 gain a month earlier that was bigger than previously estimated. The jobless rate held at 5 percent, a more than seven-year low.
A healthy rate of hiring has raised the odds that Federal Reserve officials will boost rates this month for the first time since 2006. The pace of future increases is contingent on progress toward the central bank’s inflation goal and probably depends on how quickly wage pressures mount as the job market tightens.
Today’s report was the last major jobs data before the Fed’s December policy meeting. In two separate speeches this week, Fed Chair Janet Yellen signaled the economy is ready for a rate increase as soon as this month and that she hopes to tighten monetary policy slowly. Traders are pricing in 76 percent odds of a liftoff.
Philadelphia Fed President Patrick Harker said today the central bank should raise interest rates “sooner rather than later” to allow a gradual pace of future increases, in his first public comments on monetary policy since taking office.
“The data implies an improving U.S. economy, which should provide a backdrop for the Fed to raise rates at their upcoming meeting,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “You’ll see the market react positively to this data. Expect to see strong performance from financial stocks today, as they’ll be the beneficiaries of a potential rate hike.”
With Friday’s gains, the S&P 500 erased its weekly decline. A rally on Tuesday to kick off December sent the index to its highest level in almost a month, and within 1.4 percent of its record set in May. Since then, it’s down 0.5 percent, while still about 12 percent above its low in August.
The Chicago Board Options Exchange Volatility Index fell 18 percent Friday to 14.81, its steepest drop in more than two years. The measure of market turbulence known as the VIX surged 14 percent on Thursday, the most in three weeks.
Nine of the S&P 500’s 10 main groups rose today, with financial, telephone, technology and health-care companies gaining the most. All nine advancing industries climbed more than 1.4 percent.
Financial companies in the S&P 500 added 2.7 percent, their biggest increase in more than three months, as investors speculated that banks will benefit from higher benchmark lending rates. Meanwhile, the 10-year U.S. Treasury note’s yield declined 1.8 percent, trimming a 6.1 percent surge yesterday. Charles Schwab Corp. increased 4.6 percent, while Morgan Stanley and Bank of America Corp. rose more than 2.5 percent.
Consumer staples stocks climbed 2.3 percent, the most since Aug. 26. Mondelez International Inc. and Molson Coors Brewing Co. rose more than 3.4 percent. Procter & Gamble Co. added 2.8 percent, its best advance in six weeks.
Newmont Mining Corp., the biggest U.S. gold producer, climbed 9.2 percent to post the strongest gain in the S&P 500 as gold prices jumped the most since April. The shares closed at the highest level since July. Alcoa Inc. advanced 3.9 percent and Dow Chemical Co. added 2.8 percent to pace raw materials’ 1.8 percent climb.
Electronic Arts Inc. increased 4.7 percent, its biggest gain since Oct. 12, after the stock was raised to the equivalent of buy from neutral by Atlantic Equities. Dollar Tree Inc. climbed 4.3 percent to a three-month high after being raised to a “top pick” from outperform at RBC Capital Markets. Toymaker Mattel Inc. added 4.3 percent to its highest since July 15.
The Bloomberg U.S. Airlines Index gained 3.9 percent, the most since Oct. 9, amid the slide in crude oil. Southwest Airlines Co. and Alaska Air Group Inc. climbed at least 4.4 percent to trade at all-time highs. All 11 companies in the gauge rose.
The S&P 500 Energy Index slipped 0.5 percent. Oil producers in the group took a hit with crude falling 2.5 percent after OPEC decided to maintain production at current levels and refrained from setting an official output target. Consol Energy Inc. and Kinder Morgan Inc. slid more than 11 percent, while Southwestern Energy Co. lost 5.5 percent.
NRG Energy Inc., the biggest independent U.S. power producer, fell for the third time in four days, taking its slide this week to 23 percent. The shares plunged 13 percent on Wednesday after announcing the sale of two power plants, and bounced 1.7 percent yesterday after saying Chief Executive David Crane was stepping down. The stock fell another 18 percent today, closing at an all-time low.
Barnes & Noble Inc. dropped 17 percent to its lowest since February 2014. The bookseller posted a quarterly loss and weaker sales, hurt by sluggish online orders and a fast-declining Nook e-reader business.