S&P 500 climbs to 5-year high as Treasuries erase drop on jobs

U.S. stocks rose, sending the Standard & Poor’s 500 Index above its best closing level in five years, as employers added more workers while the jobless rate held at a level that’s unlikely to hasten the end of Federal Reserve stimulus. Treasuries erased early losses.

The S&P 500 added 0.6 percent to 1,467.41 at 3:44 p.m. in New York to extend a weekly gain to 4.7 percent and bring it above its highest closing level since December 2007. The Stoxx Europe 600 Index added 0.4 percent, closing at the highest since February 2011. The Dollar Index increased less than 0.1 percent after earlier jumping as much as 0.6 percent. Treasury 10-year yields were little changed at 1.91 percent after earlier touching the highest since April. Silver and gold slid.

U.S. employers added workers in December at about the same pace as in the prior month even as lawmakers struggled to reach a budget deal, according to the Labor Department’s monthly payrolls report. Fed policy makers said yesterday they will probably end their $85 billion monthly bond purchases, known as quantitative easing, in 2013, according to minutes of their Dec. 11-12 meeting released yesterday.

The jobs report “reinforces the view that the labor market is healing but at a very slow pace,” Joseph Tanious, a New York-based global market strategist for JPMorgan Funds, which oversees $400 billion, said by telephone. “It’s a good report that suggests the economy is healing but it’s not so good that the Fed might pull out of QE. It’s been a shortened week but jam packed and everybody’s still digesting everything.”

Market Movers

The S&P 500 retreated 0.2 percent yesterday after the release of the Fed minutes. The gauge soared 2.5 percent on Jan. 2 after Republicans and Democrats agreed on a compromise budget that avoided the so-called fiscal cliff of sweeping tax increases and spending cuts. The VIX, as the Chicago Board Options Exchange Volatility Index is known, slid as much as 6.3 percent today to a four-month low of 13.64. The benchmark gauge of U.S. equity options has tumbled 39 percent since Dec. 28, approaching its biggest weekly loss on record.

Commodity, industrial and financial companies led the market’s gain today as nine of 10 industry groups advanced, while Walt Disney Co., Alcoa Inc. and JPMorgan Chase & Co. rose more than 1.4 percent helped lead gains in gains in the Dow Jones Industrial Average.

Eli Lilly & Co. jumped 3.6 percent as it forecast 2013 earnings above analyst expectations. Citigroup Inc. advanced 2.1 percent after Goldman Sachs Group Inc. added the bank to its conviction buy list. Avon Products Inc. gained 3.2 percent after Bank of America Corp. raised its rating on the stock.

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