U.S. Stocks Advance on Stimulus Bets Before Jobs Report

U.S. stocks rose, with the Standard & Poor’s 500 Index erasing earlier losses to snap a two-day losing streak, as investors weighed the Federal Reserve’s stimulus plans before a report on employment growth tomorrow.

All 10 industries in the S&P 500 advanced. Verizon Communications Inc. and AT&T Inc. added at least 1.6 percent as phone stocks gained the most as a group. Banks and health-care companies jumped 1.4 percent. Costco Wholesale Corp. rose 1.8 percent after reporting an increase in sales. VeriFone Systems Inc. plunged 21 percent as the maker of credit-card terminals forecast earnings that missed analysts’ estimates.

The S&P 500 added 0.9 percent to 1,622.56 at 4 p.m. in New York after falling as much as 0.7 percent earlier in the day. The Dow Jones Industrial Average added 80.03 points, or 0.5 percent, to 15,040.62. Almost 6.9 billion shares traded hands on U.S. exchanges today, 8.7 percent higher than the three-month average.

“The U.S. markets are going through a transition from being liquidity driven to a rally based on fundamental data and that’s a very bumpy ride,” Andres Garcia-Amaya, global market strategist at JP Morgan Funds, where he helps oversee about $400 billion, said via phone. “Investors are trying to figure out whether we are now pricing in earnings and the jobs situation or whether it’s still the Fed leading markets. So we’re slowly taking off the training wheels and that makes things a little wobbly.”

Fed Liquidity

The Fed stimulus and better-than-expected earnings have propelled the bull market in U.S. equities into a fifth year and driven the S&P 500 up 140 percent from a 12-year low in 2009. The gauge has dropped 2.8 percent since closing at a record high on May 21, the day before Fed Chairman Ben S. Bernanke suggested the central bank could curtail its $85 billion in monthly bond buying if the job market improves in a “real and sustainable way.”

A Labor Department report tomorrow is expected to indicate employers added 163,000 to non-farm payrolls last month, almost equal to the gain in April. The agency issued data today that showed jobless claims decreased by 11,000 to 346,000 in the week ended June 1. The median forecast of 47 economists surveyed by Bloomberg called for a drop to 345,000. Data yesterday showed companies in the U.S. hired fewer workers than projected in May.

“It’s wait-and-see before the jobs report tomorrow,” Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a telephone interview. His firm oversees $1.6 billion. “It all depends on how traders will read that data and its effect on the Fed’s decision making. We need to be assured that the Fed will not taper off monetary stimulus or we need to see significant improvement in the economy to get the next leg up in the rally.”

Draghi Comments

European equities fell today after European Central Bank president Mario Draghi said policy makers left additional stimulus measures “on the shelf.” The euro-area will return to growth by the end of they year, Draghi said at a press conference after the ECB kept its benchmark interest rate unchanged at a record low.

“The improving jobless report in the U.S. and Draghi’s statement created fear that the central banks will unwind monetary easing because things are getting better,” Donald Selkin, who helps manage about $3 billion of assets as the chief market strategist at National Securities Corp. in New York, said via phone.

Moving Averages

Selling in U.S. equities gained momentum earlier today as the S&P 500 briefly dropped below its 50-day moving average for the first time since April. That level, currently at 1,605.35, is watched by speculators.

The benchmark index plunged 1.4 percent yesterday to the lowest since May 2 and the Dow dropped 217 points for its biggest decline since April 15. The Dow today also slipped below its trading average of 14,923.91 for the past 50 days. That was the first time this year it happened for the 30-stock gauge.

“There’s some trader anxiety lingering from yesterday’s big move down,” Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said in an interview. “The market is testing the 50-day moving average on the S&P 500.”

The Chicago Board Options Exchange Volatility Index, or VIX, fell 5 percent to 16.63. The benchmark gauge for American stock options, which moves in the opposite direction as the S&P 500 about 80 percent of the time, rose as much as 5.8 percent today, briefly erasing its loss for the year as it traded above the 2012 close of 18.02. The index has fallen 7.7 percent this year and touched a six-year low in March.

Phone stocks surged 2.2 percent. Verizon jumped 3.5 percent to $49.97, its biggest advance since August 2011. AT&T rose 1.6 percent to $35.81.

Homebuilder Rally

An S&P index that tracks homebuilders added 3.5 percent, snapping a four-day losing streak, as all 11 members increased. PulteGroup Inc. rose 4.7 percent to $21.10, and D.R. Horton Inc. gained 2.7 percent to $23.27. Home Depot Inc., the largest home-improvement retailer in the U.S., climbed 2.9 percent to $77.26 for among the biggest jumps in the Dow.

Costco advanced 1.8 percent to $111.09. The largest U.S. warehouse-club chain said comparable-store sales, excluding fuel, increased 5 percent in May, exceeding analyst estimates of 4.9 percent.

Ciena Corp. jumped 17 percent to $19.15. The maker of communications-network equipment for phone carriers and other customers reported third-quarter sales forecasts that topped estimates.

The report helped lift other communications-equipment suppliers. JDS Uniphase Corp. shares surged 8.3 percent to $14.22, the highest since April 11. Finisar Corp. added 4.9 percent to $13.52.

SodaStream, Pepsi

SodaStream International Ltd. increased 2.7 percent to $71.24, paring an earlier gain of as much as 9.7 percent. Calcalist, an Israeli business website, reported that PepsiCo Inc. is in talks to buy the maker of home soda machines without saying where it obtained the information. PepsiCo Chief Executive Officer Indra Nooyi said in an interview in Myanmar that it’s the first time she had heard about the talks.

Chevron Corp. dropped 0.8 percent to $120.59 for the biggest loss in the Dow. Intel Corp. slid 0.2 percent to $24.65, as technology companies advanced 0.1 percent for the slimmest gain among S&P 500 groups.

J.M. Smucker Co. fell 3.9 percent to $98.38 for the biggest decline in the S&P 500. The food maker’s fiscal fourth-quarter sales fell short of analyst estimates.

VeriFone sank 21 percent to $17.37 as the company forecast third-quarter adjusted earnings of about 20 cents a share. Analyst estimates compiled by Bloomberg had predicted 51 cents. Second-quarter profit and sales also missed projections.

VeriFone dismissed Chief Executive Officer Douglas Bergeron in March as diminished demand for credit-card terminals hurt earnings.

Before it's here, it's on the Bloomberg Terminal.