U.S. stocks rallied, with the Dow Jones Industrial Average reaching 15,000 for the first time, and Treasuries slid as faster-than-forecast employment growth bolstered optimism in the world’s largest economy. Copper surged the most since 2011 to lead commodities higher.
The Dow climbed 147.41 points, or 1%, to 14,978.99 at 2:52 p.m. in New York and surged as high as 15,009.59. The S&P 500 advanced 1.1% to 1,614.7, above 1,600 for the first time, and Germany’s DAX Index rose 2% to close at a record. Ten-year Treasury yields, which reached the lowest level of the year yesterday, jumped 11 basis points to 1.74% for the biggest gain since September. Copper surged 6.8% and zinc increased 3.6%.
U.S. payrolls expanded by 165,000 workers last month and revisions to the prior two months added a total of 114,000 jobs to the employment count. The median forecast of economists in a Bloomberg survey called for an increase of 140,000 positions. The report overshadowed other data showing weaker-than-forecast growth in service industries and a drop in factory orders.
“This certainly gives some indication that there’s life in the economic recovery,” James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management, said by telephone. “Recent evidence suggested economic growth was down-shifting in the second quarter. The good news, versus what the market thought, added some confidence here.”
The Institute for Supply Management’s non-manufacturing index decreased to 53.1 in April from 54.4 a month earlier, less than the median economist forecast for a reading of 54. The 4% drop in factory orders reported by the Commerce Department was the biggest since August and followed a revised 1.9% gain the prior month that was smaller than previously estimated.
Industrial, commodity, consumer, technology and financial shares jumped at least 1.1% to lead gains in eight of the 10 of the main industry groups in the S&P 500. Caterpillar Inc., Alcoa Inc. and 3M Co. surged at least 1.8% to lead the Dow’s gain.
Kraft Foods Group Inc. climbed 5.4% as first-quarter profit beat estimates. American International Group Inc. rose 6% as operating earnings surpassed projections. LinkedIn Corp. tumbled 12% after forecasting second-quarter sales that missed analysts’ predictions.
The S&P 500 rallied 0.9% yesterday as the European Central Bank cut its key interest rate and U.S. jobless claims unexpectedly fell. The Federal Reserve said May 1 it will keep buying bonds at a monthly pace of $85 billion while standing ready to raise or lower purchases as the economy changes.
“We’re right in the sweet spot,” Darrell Cronk, the New York-based regional chief investment officer at Wells Fargo Private Bank, which oversees $170 billion, said by telephone. “The Fed doesn’t have enough data to feel comfortable that they’re ready to exit or taper yet. But the data is strong enough to confirm that the expansion is intact, and the bones of this recovery are where they need to be.”
The benchmark U.S. equities index is up 2.1% over the past five days, poised for a second straight weekly gain. The U.S. bull market entered its fifth year in March and the S&P 500 has surged almost 140% from a 12-year low in 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases by the Fed.
Of the 404 companies in the S&P 500 that have reported results so far, 73% exceeded analysts’ earnings predictions while 53% missed on sales, data compiled by Bloomberg show. Profit at S&P 500 companies rose 2% in the first three months of the year, according to estimates compiled by Bloomberg.
In Europe, the Stoxx 600 extended its weekly gain to 1.7% and is trading an almost five-year high. Royal Bank of Scotland Group Plc slid 5.7% after posting a bigger decline in operating profit than analysts had estimated. BNP Paribas SA added 2.4% as France’s largest lender reported first-quarter profit that exceeded analysts’ estimates.
The bonds of Europe’s lower-rated nations pared or reversed gains after rallying earlier. Spain’s two-year note yield was little changed at 1.54% after dropping below 1.5% for the first time since April 2010. Yields on Italy’s benchmark 10-year debt added six basis points to 3.82% after sliding to as little as 3.68%, the lowest in more than seven years. Portugal’s 10-year bond yields declined 15 basis points to 5.50% and Greek rates slid 49 basis points to 9.80%, the least since 2010 for both.
Copper rose 6.8% to $3.3145 a pound in New York, headed for the biggest increase since October 2011. The U.S. is the biggest buyer of the metal after China. Zinc increased 3.6% to $1,885 a ton, while nickel advanced 3.7% to $15,225 a ton. Glencore Xstrata Plc said it will cease production at its Sinclair nickel mine in Western Australia on May 15.
West Texas Intermediate crude oil rose 2% to $95.89 a barrel after jumping 3.3% yesterday. Natural gas added 0.6% after the futures tumbled 7% yesterday, their biggest drop in nine months.
The MSCI Emerging Markets Index rose 0.6% and is up 2.1% in five days, heading for its biggest weekly gain in four months. The Shanghai Composite Index advanced 1.4%, rebounding from a four-month low, and Russia’s Micex Index added 2.3%.
India’s Sensex index dropped 0.8% as the central bank said there was “little space” for further monetary easing after policy makers cut interest rates for a third consecutive meeting.