U.S. Stocks Advance as Commodity Shares Rally Amid Jobs Report

  • Dow average erases 258-point drop after weaker jobs data
  • Companies that benefit from weaker dollar lead the climb

The Standard & Poor’s 500 Index posted its longest winning streak since July amid a rally led by energy and raw-material companies, as investors reassessed the economic impact from a weaker-than-expected jobs report.

The Dow Jones Industrial Average wiped out a 258-point drop as Pfizer Inc. and Chevron Corp. climbed more than 3.8 percent, while Caterpillar Inc. added 2 percent. The profitability of those companies benefits from a weaker dollar, which slid today as investors pushed out expectations for higher interest rates. Commodity shares, also sensitive to moves in the dollar, were higher as Freeport-McMoRan Inc. and Dow Chemical Co. gained more than 3.4 percent.

The S&P 500 Index rose 1.4 percent to 1,951.36 at 4 p.m. in New York, wiping out an earlier drop of as much as 1.6 percent in its biggest intraday rebound since October 2011. The Dow climbed 200.36 points, or 1.2 percent, to 16,472.37. The gauge spanned 459 points from its session high to low. The Nasdaq Composite Index increased 1.7 percent. About 8.3 billion shares traded hands on U.S. exchanges, 14 percent above the three-month average.

“While it was a big disappointment, I don’t think it changes the overall picture,” said Kate Warne, an investment strategist at Edward Jones in St. Louis. “I wouldn’t peg one jobs report, even with previous revisions, as stemming improvements out there. But it’s obviously going to take longer, and the choppier path and more erratic data is likely to occur as the economy works through the rough patch.”

Fed Vindicated

Data today showed employers added a lower-than-projected 142,000 workers to payrolls in September. The jobless rate held at a seven-year-low 5.1 percent as people left the labor force, wages stagnated and revisions cut the job count in prior months.

The weak report vindicates the Federal Reserve’s decision to delay an interest-rate increase last month. Cooling overseas markets, a stronger dollar and lower oil prices that are hampering exports and manufacturing raise the risk that employers will hesitate before taking on more staff.

Fed officials have previously suggested the economy is strong enough for higher rates this year, despite their hesitation to raise borrowing costs last month amid global market turmoil and weakness in China. Traders now are pricing in about a 34 percent chance the central bank will raise rates this year, down from about 45 percent prior to the jobs report. Odds they will be higher in January fell to 40 percent from 52 percent earlier.

“The rate increase definitely got pushed back as a result, and that takes away a continued strengthening of the dollar,” said Walter “Bucky” Hellwig, who helps manage $17 billion as a senior vice president at BB&T Wealth Management in Birmingham, Alabama. “Weak dollar beneficiaries are starting to rise.” The weaker dollar boosts American multinational companies’ profits when their overseas earnings are converted back to the U.S. currency.

St. Louis Fed President James Bullard said in a speech today that the central bank would still provide “considerable” accommodation to guard against “pitfalls and risks.” Separately, Fed Vice Chairman Stanley Fischer said he doesn’t see immediate risks of financial bubbles in the U.S., while raising concerns that the central bank’s policy tool kit is limited and untested.

Factory Data

A reading on August factory orders today also fell more than forecast, while an increase in July was revised lower. A measure of manufacturing released yesterday showed activity barely grew in September as a broader swath of industries suffered from the effects of a strong dollar and faltering overseas markets.

“We’re seeing some weakness in some of the manufacturing numbers earlier in the week,” said Joseph Betlej, who helps oversee $33 billion as vice president of Advantus Capital Management. “That was causing me some concern. Seeing the confirmation with payroll is a disappointment. I think it’s really going to cause people to second guess the strength of the economy.”

Stock gains over the last four days were a respite for markets rattled by worries that China’s slowdown will stunt global growth and amid mixed messages on Fed policy. The S&P 500 just posted its worst quarter since 2011 while market turbulence has soared, with a measure of volatility surging to its biggest monthly gain ever in August. The equity benchmark closed Friday down 8.4 percent from a record set in May.

The Chicago Board Options Exchange Volatility Index fell 7.1 percent to 20.94, erasing an earlier 8.5 percent jump. The gauge of market turbulence known as the VIX closed 11.4 percent lower for the week, after a 34 percent climb last quarter.

Energy, raw-materials and health-care shares rallied the most among the S&P 500’s 10 main groups, rising more than 2 percent. Financials were little changed, after slumping more than 3 percent, as banks pared their retreat.

Energy, Raw-Materials

In addition to the weaker dollar, energy companies got a lift after U.S. explorers reduced the number of rigs drilling for oil to a five-year low, signaling further drops in production. The group jumped 4 percent, the most in a month. Diamond Offshore Drilling Inc. and Transocean Ltd. jumped more than 8.2 percent, the most since August.

It was the fourth day of gains for raw-material companies, their longest stretch in more than two months. Newmont Mining Corp. climbed 7.8 percent amid gold’s best rally in six weeks. Martin Marietta Materials Inc. increased 4.1 percent to bring its three-day advance to 9.9 percent, the strongest since February.

Biotechnology shares rallied for a third day, after the Nasdaq Biotechnology Index on Wednesday halted its longest losing streak in nearly seven years. The gains pushed health-care companies higher, as Mylan NV and Vertex Pharmaceuticals Inc. rallied at least 5.4 percent. Pfizer climbed 3.9 percent, the most in 17 months, to rise 7.3 percent since Monday’s close.

Banks slipped as investors bet that falling bond yields mean low interest rates will continue to crimp profits. Bank of America Corp. and Fifth Third Bancorp lost at least 1 percent, trimming earlier declines of more than 4 percent. The KBW Bank Index sank 0.6 percent, with 21 of 24 members sinking, after losing as much as 4.5 percent.

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