U.S. Stocks Gain for Week as Jobs Report Tops Estimates

U.S. stocks rose for the week, ending back-to-back losses for the Standard & Poor’s 500 Index, as American companies added more workers to payrolls than economists forecast, signaling the economy continues to expand.

Wal-Mart Stores Inc. increased 2 percent after approving a $15 billion share buyback program. Gap Inc. jumped 3.8 percent as it reported same-store sales for May that were higher than estimates. Merck & Co. and Bristol-Myers Squibb Co. jumped 3.2 percent as a JPMorgan Chase & Co. analyst said the companies’ experimental cancer drugs show promise. Pfizer Inc. and Verizon Communications Inc. rallied at least 3.6 percent, pacing gains among the biggest U.S. companies.

The S&P 500 advanced 0.8 percent to 1,643.38 for the week. The Dow Jones Industrial Average added 132.55 points, or 0.9 percent, to 15,248.12. Both gauges slid in the prior two weeks.

The jobs report “was just weak enough to reduce expectations that the Fed’s going to react and just strong enough to suggest that the economy is hanging in there,” David Joy, the Boston-based chief market strategist at Ameriprise Financial Inc., which oversees about $708 billion, said by telephone. “It was a good report for equities,”

The S&P 500 erased a weekly loss on the last trading day after a Labor Department report showed payrolls rose 175,000 last month after a revised 149,000 increase in April that was smaller than first estimated. The median forecast in a Bloomberg survey called for a gain of 163,000. The unemployment rate climbed to 7.6 percent from 7.5 percent as a surge of people entering the labor force swamped the number of positions available.

Labor Market

The improvement in the labor market is a sign companies are looking beyond fiscal restraint this quarter and are optimistic enough about the prospects for demand in the second half of the year. At the same time, bigger job and wage gains are needed to move Federal Reserve policy makers closer to scaling back record monetary stimulus.

Investors weighed mixed economic data earlier in the week after a report from ADP Research Institute showed U.S. companies hired fewer workers than projected in May amid federal budget cuts and higher taxes. Separate data from the Commerce Department showed U.S. factory orders in April fell short of estimates. A gauge of service industries, which covers almost 90 percent of the economy, rose more than forecast.

Telephone Shares

Telephone companies gained the most out of 10 S&P 500 industries, rallying 1.9 percent. The Morgan Stanley Cyclical Index fell 0.5 percent for the third week of losses and the S&P Supercomposite Homebuilding Index lost 2.4 percent as all 11 members in the measure slumped.

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 143 percent from a 12-year low in 2009. The index has dropped 1.5 percent since closing at a record on May 21, the day before Fed Chairman Ben S. Bernanke suggested the central bank could curtail its $85 billion monthly bond purchases if the job market improved in a “real and sustainable way.”

The Chicago Board Options Exchange Volatility Index, or VIX, lost 7.1 percent to 15.14 this week. The index, a benchmark gauge for American stock options, is down 16 percent this year.

Pfizer, the world’s largest drugmaker, jumped 3.8 percent to $28.26 for the biggest gain in the Dow. Verizon Communications gained 3.6 percent to $50.24.

Share Buyback

Wal-Mart gained 2 percent to $76.33, snapping a four-week stretch of losses. The world’s largest retailer’s new buyback program replaces the previous $15 billion authorization, which had about $712 million remaining, the company said in a statement.

Gap jumped 3.8 percent to $42.09. Total comparable sales rose 7 percent last month, according to a statement from the largest U.S. specialty apparel retailer. Analysts had projected 3.7 percent, on average, according to researcher Retail Metrics Inc.

Health-care companies in the S&P 500 added 0.8 percent as a group. Merck rose 3.2 percent to $48.19 and Bristol-Myers Squibb added 3.2 percent to $47.50 after JPMorgan analyst Chris Schott said the two have promising cancer immunotherapies.

Bristol-Myers is “well in the lead” with a combination of Yervoy, a medicine already on the market, with its experimental immune therapy nivolumab, Schott wrote in a note to investors. Meanwhile, Merck is rolling forward “the next agent to watch,” he wrote.

‘Key Call’

Yum! Brands Inc. climbed 8.5 percent to $73.52. UBS AG raised its recommendation for the owner of KFC to buy from neutral and added the company to its U.S. “key call” list, saying sales and profitability in China will start to improve from the impact of recent health scares in the country.

GameStop Corp. jumped 11 percent to $36.75. Microsoft Corp. responded to concerns about trade-in rights on its new Xbox One console, saying users may sell titles back to retailers or give them to friends provided they have approval from the publisher. Microsoft said only “participating retailers” would broker trade-ins, which is “particularly positive” for GameStop, according to Piper Jaffray Cos.’ Michael Olson in a note.

Iron Mountain Inc. tumbled 19 percent to $28.95 for the biggest decline in the S&P 500, and Equinix Inc. slumped 5 percent to $192.57. The two technology companies said the U.S. Internal Revenue Service is scrutinizing their eligibility to convert to real estate investment trusts.

Salesforce.com Inc. sank 6.4 percent to $39.61. The largest maker of customer-management software agreed to buy ExactTarget Inc. for about $2.5 billion, its biggest acquisition ever, to expand in online marketing. The cash offer was 53 percent more than ExactTarget’s closing price on the day before the deal was announced.

Zynga Inc. tumbled 16 percent to $2.84. The biggest maker of online social games said it will cut 520 jobs, or 18 percent of its staff, and close some offices amid disappointing results from its titles outside the “FarmVille” series.

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