U.S. Stocks Halt Five-Day Slide After November Jobs DataNick Taborek and Callie Bost
U.S. stocks rose, halting a five-day slide for the Standard & Poor’s 500 Index, as investors weighed better-than-forecast jobs growth to gauge the strength of the economy and timing of Federal Reserve stimulus cuts.
Intel Corp. gained 2.3 percent after Citigroup Inc. advised investors to buy the stock. Rite Aid Corp. added 2.3 percent after November sales at stores open more than a year rose more than analysts’ estimated. J.C. Penney Co. dropped 8.7 percent after disclosing that regulators asked for information about its finances.
The S&P 500 gained 1.1 percent to 1,805.09 at 4 p.m. in New York. The advance trimmed the index’s drop this week to less than 0.1 percent, the first weekly slide in two months. The Dow Jones Industrial Average rose 198.69 points, or 1.3 percent, to 16,020.20. About 5.8 billion shares changed hands on U.S. exchanges, 5 percent below the three-month average.
“It appears that the market is getting increasingly comfortable with a taper scenario that parallels an incrementally stronger economy,” Jim Russell, who helps oversee $112 billion as a senior equity strategist for U.S. Bank Wealth Management, said by phone. “The higher number could more easily be accepted because the market had traded down, anticipating what was likely to be a stronger number today, and of course we got that.”
The 203,000 increase in payrolls followed a revised 200,000 advance in October, Labor Department figures showed today. The median forecast of 89 economists surveyed by Bloomberg called for a 185,000 advance. A report Dec. 4 from the ADP Research Institute indicated companies boosted payrolls in November by the most in a year.
The pickup in employment, combined with faster wage gains and more hours, provides American workers with the means to spend and signals companies are confident that demand will improve. The jobless rate fell to a five-year low of 7 percent.
A separate report today showed consumer spending rose more than forecast in October, a sign the biggest part of the economy is gaining momentum from a firming employment.
Household purchases, which account for about 70 percent of the economy, climbed 0.3 percent after a 0.2 percent increase the prior month, the Commerce Department reported today.
The Thomson Reuters/University of Michigan preliminary December consumer sentiment index rose to 82.5 from 75.1 in November, a report showed today. Economists forecast an increase to 76, according to the median estimate in a Bloomberg survey.
“This morning’s data on jobs doesn’t change the overall picture on the job market,” John Canally, economic strategist at LPL Financial Corp., said in a phone interview from Boston. His firm oversees about $414.7 billion. “This wasn’t a slam dunk report saying the Fed will taper in December. It’s the taper-no taper game, and this was the no-taper reaction.”
The S&P 500 had fallen five straight sessions after closing at a record Nov. 27, its longest slump since September, as improving economic data fueled speculation the Fed will start paring its $85 billion in monthly bond purchases sooner than projected. The index has still surged 27 percent this year, challenging 2003 for the biggest annual gain in 15 years.
The Fed says it will consider slowing the pace of stimulus if the economy improves in line with its forecasts. In a Nov. 19 Bloomberg Global Poll, 80 percent of investors said they expected the central bank to delay a decision until at least March 2014. Policy makers next meet Dec. 17-18.
Data yesterday showed the economy expanded in the third quarter at a faster pace than initially reported, led by the biggest increase in inventories since early 1998. A separate report showed applications for U.S. employment benefits unexpectedly decreased last week.
Bill Gross, manager of the world’s biggest bond fund, said the pace of jobs growth last month signals there is a 50 percent chance the Fed will taper this month.
“It’s at least 50-50 now,” Pacific Investment Management Co.’s Gross said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Mike McKee. “There was some logic for a January starting point, but it’s clear the Fed wants out.”
The monetary stimulus has helped propel the S&P 500 higher by as much as 167 percent since a bear-market low in March 2009. The rally has pushed valuations higher, with the gauge trading for about 16.8 times its companies’ reported earnings, up 18 percent from the beginning of the year when it traded at 14.2 times profit.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, plunged 8.6 percent, the most since Oct. 16, to halt a record-tying eight-day rally that added 23 percent to the measure.
All 10 main S&P 500 groups advanced at least 0.5 percent. Industrial and consumer-staples shares paced gains, rallying more than 1.4 percent. Procter & Gamble Co. added 2.2 percent to $84.52 and Boeing Co. advanced 1.9 percent to $135.18.
Intel jumped 2.3 percent to $24.82 for the biggest gain in the Dow. Citigroup raised its recommendation on the shares to buy from neutral, saying stability in corporate demand for personal computers will benefit the world’s biggest chipmaker.
Boston Scientific Corp. advanced 4.5 percent to $11.85. Cowen Group Inc. analyst Joshua Jennings upgraded the medical-device manufacturer to the equivalent of buy from hold, with a target price of $14 per share.
General Motors Co. rose 2.8 percent to $40.17, the highest level since it began trading in 2010 after a 2009 bankruptcy. Hayman Capital Management LP disclosed yesterday it has taken a stake in the largest U.S. automaker.
Rite Aid gained 2.3 percent to $5.75. The drug-store chain operator reported November same-store sales advanced 2.8 percent, surpassing the 2.1 percent median forecast by analysts in a Bloomberg survey.
J.C. Penney plunged 8.7 percent to $8.08, extending a three-day slide to 20 percent. A letter from the Securities and Exchange Commission on Oct. 7 requested “information regarding the company’s liquidity, cash position, and debt and equity financing, as well as the company’s underwritten public offering of common stock,” the struggling retailer said in a quarterly filing.
Sears Holdings Corp. fell 3.8 percent to $48.09, capping a 24 percent decline for the week after Edward Lampert, the hedge-fund manager who for the past eight years tried to turn around the retailer, cut his stake to below 50 percent.
Today’s retreat came after Sears said it plans to spin off its Lands’ End Inc. unit to shareholders. The stock has fallen eight straight sess.ions and trades at a three-month low.
Gap Inc. slid 1.9 percent to $39.46, a fourth-straight drop, even as sales at stores open at least a year increased 2 percent from last year. The biggest U.S. specialty-apparel retailer offered discounts of as much as 50 percent at its three brands during Thanksgiving and Black Friday.
Family Dollar Stores Inc. dropped 2.4 percent to $65.98, the lowest since July. Sterne, Agee & Leach Inc. equity analyst Charles Grom downgraded the discount retailer to underperform from neutral, with a 12-month target price of $56 per share. The stock has not advanced for eight straight sessions.
Ulta Salon, Cosmetics & Fragrance Inc. plunged 21 percent, the biggest drop in almost five years, to $93.76. The cosmetics and hair-care products retailer reported fourth-quarter profit and revenue forecasts that missed analysts’ estimates.