S&P 500 Climbs Toward Record After Employment Report

U.S. stocks rose, sending the Standard & Poor’s 500 Index within 1 percent of a record high, as data showed employers added more jobs than forecast last month and the unemployment rate unexpectedly dropped.

McDonald’s Corp. gained 1.7 percent after the restaurant chain said store sales fell less than analysts estimated. Citigroup Inc. added 3.7 percent as it sought permission to buy back shares. Goldman Sachs Group Inc. lost 2.3 percent for the second-biggest drop in the S&P 500 after lagging behind peers in a measure of capital strength used by regulators. Pandora Media Inc. surged 18 percent as quarterly revenue jumped.

The S&P 500 rose 0.5 percent to 1,551.18 at 4 p.m. in New York. The Dow Jones Industrial Average increased 67.58 points, or 0.5 percent, to 14,397.07. Both measures have been up for six straight days, the longest winning streak since Jan. 25. More than 6.4 billion shares traded hands on U.S. exchanges today, in line with the three-month average.

“People are starting to hire, and in fact they have been hiring for a few quarters,” Carla Ann Harris, managing director and senior client advisor at Morgan Stanley, said in a television interview on Bloomberg’s “Market Makers.” “Some of the caution with respect to the payrolls is starting to abate. You’ll probably see a faster pace as people start to move towards growth as opposed to maintaining the status quo because of the uncertainty they feel in the market.”

Employment rose 236,000 last month after a revised 119,000 gain in January that was smaller than first estimated, Labor Department figures showed today in Washington. The median forecast of 90 economists surveyed by Bloomberg projected an advance of 165,000. The jobless rate dropped to 7.7 percent. Hiring in construction jumped by the most in almost six years.

Record Highs

The S&P 500 has rallied 2.2 percent this week, its biggest gain in two months, as jobless-benefit claims fell to a six-week low and investors speculated that central banks will continue with stimulus measures. The benchmark equity gauge is less than 1 percent below the record of 1,565.15 reached in October 2007 and the Dow is at an all-time high.

About 82 percent of stocks in the S&P 500 yesterday closed above their average price from the past 50 days, according to data compiled by Bloomberg.

The Federal Reserve has embarked on three rounds of stimulus to boost the economy and Chairman Ben S. Bernanke has pledged to continue to buy bonds until the U.S. labor market improves. Minutes from the Federal Open Market Committee’s January meeting showed policy makers were divided about the strategy and some officials said an earlier end to purchases might be needed.

‘Too Good’

“They were great numbers relative to where we’ve been, but the question is whether they were too good, too fast in the eyes of the Fed,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said by telephone. His firm oversees $250 billion. “While we continue to make all-time highs, it continues to be live by the Fed, die by the Fed.”

Global stocks rose earlier as a report showed gross domestic product in Japan expanded an annualized 0.2 percent in the fourth quarter, the Cabinet Office said. A preliminary estimate had shown the world’s third-biggest economy contracted 0.4 percent in the period. China’s exports increased 21.8 percent in February from a year earlier, the customs administration said. That beat the 8.1 percent median estimate in a Bloomberg survey of economists.

Equities briefly pared gains after Italy’s credit rating was cut one level by Fitch Ratings. An inconclusive election in February produced political paralysis in the nation, threatening Italy’s ability to respond to a recession and the European debt crisis.

Volatility Index

The Morgan Stanley Cyclical Index climbed for the fifth day. The gauge that tracks 30 U.S. companies tied to economic growth added 1.2 percent to a new record. The Chicago Board Options Exchange Volatility Index, known as the VIX, fell 3.6 percent to 12.59. The gauge has slumped 18 percent this week.

McDonald’s jumped 1.7 percent to $98.71, its highest level in almost a year. The world’s largest restaurant chain said sales at stores open at least 13 months fell less than analysts estimated in February as low prices kept consumers coming to restaurants amid a weak economy.

Citigroup added 3.7 percent to $46.68 as the third-largest U.S. bank sought Fed permission to repurchase $1.2 billion in shares a year after its previous request was rejected. The Fed said 17 of the 18 biggest banks could withstand a deep recession and maintain capital above a regulatory minimum.

Goldman, JPMorgan

Goldman Sachs, JPMorgan Chase & Co. and Morgan Stanley submitted more optimistic estimates of their capital strength and ability to avoid losses on trading and lending than Fed projections. The gap was widest for Goldman Sachs, which predicted its Tier 1 common ratio may fall as low as 8.6 percent in a sharp economic downturn, compared with the central bank’s 5.8 percent estimate.

Goldman Sachs fell 2.3 percent to $152.98 and JPMorgan, the largest U.S. bank, slipped 0.9 percent to $50.20. Morgan Stanley retreated 0.8 percent to $23.03.

Pandora surged 18 percent to $13.79. The biggest U.S. Internet radio service reported revenue of $125.1 million in the quarter ended Jan. 31, beating analysts’ estimates of $122.8 million. Excluding items, the company posted a loss of 4 cents a share, smaller than the 5-cent loss seen by analysts.

Joe Kennedy resigned unexpectedly as chairman and chief executive officer of the company. Kennedy, 53, made the decision after discussions with the board over the Pandora’s future, he said in a statement yesterday.

H&R Block

H&R Block Inc. jumped 9.2 percent to $27.28, for the largest rally in the S&P 500. The biggest U.S. tax preparer rose to the highest since 2008 after Chief Executive Officer William C. Cobb said he expects this year’s filing season to yield more business following an initial delay.

The S&P 500 may climb to 1,600 this year as more stocks participate in the market rally, Bank of America Corp.’s Mary Ann Bartels said. The index may drop as much as 10 to 15 percent after it rallied this year without a retreat of more than 3 percent, and investors should take advantage of any pullback to buy equities, Bartels said today on Bloomberg Radio.

“There are so many sectors and stocks breaking out of the 10-year trading range, that I’ve never seen in my career,” Bartels, New York-based head of U.S. technical and market analysis at Bank of America, said in an interview with Carol Massar. “This is a strong market.”