U.S. Stocks Rise as Jobs Data Offset Fed Stimulus Concern

U.S. stocks rose, pushing the Dow Jones Industrial Average to a record close, as a better-than-forecast jobs report added to signs growth is strong enough for the economy to withstand a stimulus reduction.

Priceline.com Inc. (PCLN) advanced 4.9 percent after reporting sales that topped analysts’ estimates and promoting Darren Huston to chief executive officer. Gap Inc. climbed 9.8 percent as its profit forecast beat expectations. Groupon Inc. jumped 6.4 percent after posting a narrower-than-estimated loss and agreeing to buy South Korean deals website Ticket Monster Inc. A jump in bond yields boosted insurers and weighed on homebuilders and dividend stocks.

The Standard & Poor’s 500 (SPX) advanced 1.3 percent to 1,770.60 at 4 p.m. in New York, within two points of its all-time high. The Dow Jones Industrial Average jumped 167.80 points, or 1.1 percent, to a record 15,761.78, capping its fifth week of gains in a row. About 7 billion shares changed hands on U.S. exchanges today, 15 percent above the three-month average.

“This is good news, this is what we’ve been looking for,” Erik Davidson, the San Francisco-based deputy chief investment officer for Wells Fargo Private Bank, which oversees $170 billion, said by phone. “The one thing that people have been waiting to see is an inflection point in terms of jobs and we’re starting to see that, which is great news.”

Jobs Data

The S&P 500 dropped 1.3 percent yesterday as data showing faster-than-expected economic growth fueled speculation that the Fed may scale back stimulus soon. Equities rebounded today as the labor report added to evidence that growth in the world’s largest economy is strengthening.

American employers added 204,000 workers after a revised 163,000 gain in September that was larger than previously estimated, Labor Department figures showed today in Washington. The increase in payrolls topped the most optimistic forecast in a survey of economists.

The benchmark equity gauge added 0.5 percent in the past five days for a fifth straight week of gains, the longest streak since February. The index has rallied 24 percent in 2013, heading for the best annual gain in a decade, as the central bank kept interest rates low to spur economic growth.

The Fed said last week it needs to see more evidence of sustained improvement before slowing its $85 billion monthly asset purchases. Economists predict the Fed will maintain bond purchases at the current pace until March, according to a Bloomberg survey conducted Oct. 17-18. Policy makers next meet on Dec. 17-18.

Interest Rates

“The market is trying to deal with an improvement in the economy that may be offset by higher interest rates,” Greg Woodard, a strategist in Fairport, New York, at Manning & Napier Inc., which has $49.1 billion under management, said in a phone interview. “You see a pullback in some areas of the market that are most sensitive to higher interest rates.”

Benchmark 10-year yields reached the highest level in more than three weeks as the jobs data boosted bets that the Fed may begin paring its stimulus program at its December meeting.

Three rounds of monetary stimulus from the central bank and better-than-expected earnings have driven the S&P 500 up 162 percent from a 12-year low in 2009.

Among 449 S&P 500 companies that have announced results during the earnings season, 75 percent beat analysts’ estimates for profits, data compiled by Bloomberg show. Growth in fourth-quarter earnings will accelerate to 6.2 percent from 4.7 percent in the previous three months, analysts’ projections show.

Volatility Slump

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, slipped 7.3 percent to 12.90. The measure dropped 2.9 percent in the past five days, halting a two-week winning streak.

Eight out of 10 S&P 500 industry groups rose as financial stocks surged 2.3 percent to lead gains. JPMorgan Chase & Co. rallied 4.5 percent to $53.96 for its fastest rise in a year and the biggest increase in the Dow.

Materials and consumer-discretionary companies rallied at least 1.2 percent as a group.

Priceline.com, the largest U.S. online travel agent, gained 4.9 percent to $1,073.20. Third-quarter sales rose 33 percent to $2.27 billion, topping analysts’ average estimate of $2.22 billion, according to data compiled by Bloomberg. Huston, head of Priceline’s Booking.com unit, will take the helm and join the board, ending Jeffery Boyd’s 11-year reign that saw the stock jump 100-fold.

Gap, Groupon

Gap jumped 9.8 percent, the biggest gain since August 2012, to $41.43. The largest U.S. specialty-apparel retailer said it anticipates quarterly profit that surpassed analysts’ estimates, helped by gains in sales.

Groupon (GRPN) added 6.4 percent to $10.11. The e-commerce company reported a third-quarter net loss of $2.58 million, compared with the average $14.3 million loss predicted by analysts. The Chicago-based company also agreed to buy Ticket Monster for $260 million in cash and stock, transforming itself into a service offering thousands of discounts instead of daily deals.

Walt Disney Co. rallied 2.1 percent to $68.58. The world’s largest entertainment company said fiscal fourth-quarter profit rose 12 percent, beating analysts’ estimates as the company’s theme parks and consumer products boosted income.

Nvidia Corp. increased 7 percent to $15.56. The maker of graphics processors reported fiscal third-quarter profit that exceeded analysts’ estimates as revenue from new businesses helped make up for declining personal-computer demand.

Yield Sensitive

MetLife Inc. (MET) rallied 5.4 percent to $50.14, the most since August, and Lincoln National Corp. jumped 5.7 percent to $48.76, leading gains among insurers. The firms invest funds from clients in bonds and other assets to back future payouts.

An S&P index of homebuilders slumped 2.7 percent amid concern rising borrowing costs may derail a housing recovery. All but 10 members of the gauge retreated. Lennar Corp. dropped 4.2 percent to $32.79 while PulteGroup Inc. sank 3.8 percent to $16.85 for the two biggest declines in the S&P 500.

Utility and telephone shares, which offer the highest dividend yield among 10 S&P 500 main industries, were the only groups to decline, as rising bond yields threaten to undermine the demand for equity income. Utilities pay an average 4 percent of their stock prices as dividend while phone companies offer a yield of 4.7 percent.

Twitter Inc. slid 7.2 percent to $41.65 on the second day of trading. The microblogging service surged 73 percent in yesterday’s debut, the biggest day-one jump for an initial public offering of more than $1 billion since 2007, according to data compiled by Bloomberg.

Source: Bloomberg