U.S. stocks rose, with the Standard & Poor’s 500 Index poised for its biggest weekly gain since June, amid bets on central bank stimulus as American payrolls increased less than projected.
Commodity and financial shares climbed the most among 10 S&P 500 groups as Bank of America Corp. and Cliffs Natural Resources Inc. jumped at least 4.7 percent. Caterpillar Inc. and Alpha Natural Resources Inc. rallied more than 3.7 percent as China announced infrastructure projects. Intel Corp. and Kraft Foods Inc. fell more than 3.6 percent amid disappointing forecasts, dragging the Dow Jones Industrial Average lower.
The S&P 500 rose 0.3 percent to 1,436.59 at 2:35 p.m. in New York, after reaching the highest level since 2008 yesterday. The index is up 2.1 percent in a holiday-shortened week. The Dow lost 5.83 points, or less than 0.1 percent, to 13,286.17 today. Trading in S&P 500 companies was up 27 percent from the 30-day average at this time of day.
“The market is taking this weak jobs number as a positive because it means that we’re going to get action coming from Bernanke and company,” said Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston. He spoke in a telephone interview. “It’s just this new upside-down world of investing that we’re living in where bad news is good news for assets.”
Equities rose as Labor Department figures showed the economy added 96,000 workers last month following a revised 141,000 rise in July that was smaller than initially estimated. The median estimate of 92 economists surveyed by Bloomberg called for a gain of 130,000. Unemployment unexpectedly fell to 8.1 percent, and hourly earnings were unchanged.
Employers may be reluctant to expand headcounts as they face a global economic slowdown and the so-called fiscal cliff of automatic tax increases and government spending cuts. The damage inflicted by the lack of progress on jobs is the reason Federal Reserve Chairman Ben S. Bernanke last week said the central bank may need to do more. The Federal Reserve’s Open Market Committee meets next week to discuss policy and will release a statement on Sept. 13 after a two-day meeting.
The S&P 500 climbed 2 percent yesterday as the European Central Bank announced specifics of its bond-buying plan and data boosted optimism in the American economy. The index has risen 14 percent this year as European leaders worked to tame the region’s debt crisis and the Fed vowed to safeguard the economic recovery.
“The global risk has been abating significantly, especially in Europe,” Douglas Cote, Hartford, Connecticut- based chief market strategist at ING U.S. Investment Management, said in a phone interview. His firm oversees more than $160 billion. “The bigger concern about market participants is missing a fourth-quarter rally. Hedge funds, the shorts, they will have to cover. They will have to capitulate and I think that’s going to provide the next up-leg.”
Andrew Garthwaite, a strategist at Credit Suisse Group AG, raised his forecast for the S&P 500 this year to 1,500 from 1,425, saying ECB President Mario Draghi’s announcement of an unlimited bond-purchase program is a “game-changer” in a note today. He also cited improving economic data, the likelihood of a third round of Fed stimulus, or quantitative easing, and supportive valuations. He boosted his earnings estimate for companies in the S&P 500 to $100.10 a share from $99.60.
Commodity, financial and industrial shares in the S&P 500 climbed at least 0.7 percent for the biggest advances among 10 groups today. The Morgan Stanley Cyclical Index rose 1.5 percent while the KBW Bank Index added 1.6 percent to the highest level since April. Bank of America jumped 4.7 percent to $8.74.
China approved plans to build 2,018 kilometers (1,254 miles) of roads while backing nine sewage-treatment plants, five port and warehouse projects, and two waterway upgrades, according to statements on the website of the National Development and Reform Commission yesterday. The announcements are a sign the government is stepping up stimulus efforts to revive economic growth.
Cliffs Natural, the largest U.S. iron-ore producer, rallied 14 percent to $39.57. Caterpillar, the world’s largest maker of construction and mining machines, rose 3.7 percent to $87.92. Alpha Natural, the second-largest U.S. coal producer, surged 15 percent to $6.78.
SunTrust Banks Inc., the lender that invested in Coca-Cola Co. in 1919, rose 3.1 percent to $27.50 after announcing plans to liquidate its stake to help cover costs of restructuring bad loans. The transaction will boost third-quarter net income by about $750 million, or $1.40 a share, the bank said.
Green Mountain Coffee Roasters Inc. climbed 12 percent to $27.46. The maker of Keurig coffee machines has “meaningful room” for K-Cup to increase household penetration, Matthew DiFrisco, an analyst with Lazard Capital Markets, wrote in a report initiating coverage of the stock with a buy rating.
Smith & Wesson Holding Corp. surged 14 percent to $10.23. The handgun manufacturer raised its earnings forecast for fiscal year 2013 to a range between 85 cents and 90 cents. Sales will be at least $530 million.
Intel, the world’s largest semiconductor maker, slumped 3.6 percent to $24.19. Third-quarter sales will be $13.2 billion, plus or minus $300 million, compared to a prior projection of $13.8 billion to $14.8 billion, the company said. Intel in July scaled back its annual sales forecast as personal-computer demand fails to rebound among consumers in the U.S. and Europe.
Kraft, the food producer that will split into two companies next month, fell 5.9 percent to $39.84 for the biggest retreat in the Dow. Chief Financial Officer David Brearton told investors at a conference in Boston yesterday that 2012 and 2013 earnings may be lower than expected.
“The market is thinking that central banks continue to have their back,” John Augustine, who helps manage $25 billion as chief market strategist at Cincinnati-based Fifth Third Bancorp, said in a phone interview. “What frustrates investment managers is being more focused on slowing economic growth and what that’s going to do to profits.”
Pandora Media Inc., a Internet-radio pioneer, plunged 18 percent to $10.33. Apple Inc. is considering introducing an online service to stream music based on users’ tastes, two people with knowledge of the plans said, potentially competing with Pandora.
The $1.9 trillion restored to U.S. equity prices in 2012 has pushed the S&P 500 within 10 percent of a record, more than 7 percentage points closer than any country among the world’s biggest stock markets.
Yesterday’s advance left the S&P 500 9.3 percent from its all-time high of 1,565.15, reached Oct. 9, 2007. More gains are likely as bearish investors give up and start buying, according to Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut.
“They realize it isn’t working,” Birinyi, an equity trader for Salomon Brothers Inc. in the 1980s, said in a telephone interview. “The excuses of no volume and earnings aren’t going to be good -- that’s not happening, and maybe it’s time to join the party.”