U.S. Stocks Rise on Employment Data Amid Budget Talks

U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a third week, as optimism over better-than-estimated jobs data overshadowed a drop in consumer confidence amid continuing budget talks.

JPMorgan Chase & Co. and Bank of America Corp. advanced more than 1.7 percent as financial shares rallied. American International Group Inc. rose 2.6 percent after saying it is in talks to sell 90 percent of its plane-leasing unit. Apple Inc. lost 2.6 percent, sending the maker of iPhones and iPad tablet computers to its biggest weekly decline since May 2010.

The S&P 500 rose 0.3 percent to 1,418.07, the highest level since Nov. 6, at 4 p.m. New York time. The Dow Jones Industrial Average gained 81.09 points, or 0.6 percent, to 13,155.13, extending its weekly advance to 1 percent. Both gauges advanced for a third week, the longest winning streak since August. The Nasdaq Composite Index dropped 0.4 percent to 2,978.04. More than 5.48 billion shares changed hands on U.S. exchanges, or 12 percent below the three-month average.

“We’re increasing equities,” Barry James, who helps oversee $3.5 billion as president of James Investment Research in Xenia, Ohio, said in a phone interview. “People got too pessimistic about the whole fiscal cliff thing. The markets are in a way looking for a reason to go up.”

Stocks rallied as Labor Department figures showed employment climbed by 146,000 following a revised 138,000 gain in October that was less than initially estimated. The median estimate of 91 economists surveyed by Bloomberg called for a gain of 85,000. Superstorm Sandy “did not substantively impact” the data, the agency said. The unemployment rate fell to 7.7 percent, the lowest since December 2008, as the size of the labor force shrank.

Consumer Confidence

U.S. equities briefly erased gains after a gauge of consumer confidence decreased more than forecast. The Thomson Reuters/University of Michigan preliminary index of U.S. consumer sentiment for December fell to 74.5 from 82.7 a month earlier. The median economist estimate was for a decrease to 82.

Investors also watched developments in federal budget negotiations. The White House has “wasted another week” and no progress has been made in budget talks, House Speaker John Boehner said in a news conference today in Washington. President Barack Obama and Republicans are working toward a compromise to avert what has been labeled a fiscal cliff -- a Jan. 1 surge of more than $600 billion in automatic tax increases and spending cuts that could propel the nation into recession.

‘Cross Currents’

“There is a lot of confusion and there are a lot of cross currents here to consider,” Terry L. Morris, who helps oversee about $2.5 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said in a phone interview. “Unemployment has improved, yet confidence deteriorated. How do you explain the market isn’t doing anything when Boehner comes out and says we’re nowhere? It seems like the market should have been going down, but the fact it’s not tells me that the market wants to go higher.”

Today’s gain pushed the S&P 500 above its average in the past 50 days for the first time since Oct. 19, according to data compiled by Bloomberg. The index had spent the previous 32 days below the threshold, the longest streak since a 52-day stretch that ended Oct. 7, 2011, the data show. The average is watched by traders to gauge the market’s trends.

Financial companies in the S&P 500 climbed 0.8 percent as a group to the highest level since Nov. 6. JPMorgan Chase rallied 2.6 percent, the most in the Dow, to $42.56, while Bank of America advanced 1.7 percent to $10.64.

Leasing Unit

AIG rose 2.6 percent to $34.13. The insurer said it is in talks to sell 90 percent of its plane-leasing unit to an investor group including New China Trust Co. A deal may value International Lease Finance Corp. at about $5.5 billion, according to one person with knowledge of the matter, who asked not to be identified because the talks are confidential.

After the close of regular trading, AIG said superstorm Sandy will cost the company about $1.3 billion after taxes and reinsurance, the highest sum disclosed by a U.S. insurer. The shares tumbled 1.8 percent as of 4:42 p.m. in New York.

Freeport-McMoRan Copper & Gold Inc. climbed 2.9 percent to $31.70. The world’s largest publicly traded copper producer was raised to strong buy from buy at Oracle Investment. The stock slumped 20 percent in the previous two days after agreeing to buy Plains Exploration & Production Co. and McMoRan Exploration Co. for $9 billion. The move was a “game changer and a wise use of capital,” Oracle analyst Laurence Balter said in a note.

Share Repurchases

Macy’s Inc. gained 1.3 percent to $39.41 after the department-store chain authorized a $1.5 billion increase in share repurchases.

McGraw-Hill Cos. gained 4.2 percent to $56.53. The global information-services provider announced a special dividend of $2.50 a share.

Computer and software makers in the S&P 500 fell 0.6 percent for the only loss among 10 industry groups.

Apple slipped 2.6 percent to $533.25. The shares slumped 8.9 percent this week amid concern that the company will lose ground in smartphones to Nokia Oyj in China while giving up market share to Google Inc. in tablets.

Amarin Corp. sank 19 percent to $9.69. The maker of the cholesterol-lowering drug Vascepa fell as investors lost confidence that the company will soon be acquired.

Financial Stocks

The cost of protecting against swings in financial shares from JPMorgan to Berkshire Hathaway Inc. has fallen to a 19-month low as banks fire workers to improve profitability and the housing market recovers.

Implied volatility for three-month contracts with an exercise price closest to the Financial Select Sector SPDR Fund was 21 percent higher than for the SPDR S&P 500 ETF Trust yesterday, according to data compiled by Bloomberg. That’s the smallest gap between the key measures of options prices since May 2011. A gauge of banks, brokerages and insurers in the S&P 500 has climbed 22 percent this year, the most among the 10 main groups.

Analysts forecast that financial companies will post the third-fastest profit growth among S&P 500 industries next year as mortgage interest rates near record lows help drive demand for a shrinking property supply and banks reduce costs. Home prices in October rose the most since 2006 and the U.S. economy expanded more than previously estimated in the third quarter.

“The market is recognizing that the financial sector is healing,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $170 billion, said in a phone interview yesterday. “Housing prices are rising, so the collateral of the banking system is getting more valuable, which helps banks weather any future problems.”