U.S. stocks rise as employment data offset Fed stimulus concern

U.S. stocks rose, with the Standard & Poor’s 500 Index rebounding from its biggest loss in two months, as better-than-forecast jobs report added to signs growth is strong enough for the economy to withstand a stimulus reduction.

Priceline.com Inc. advanced 5% after reporting sales that topped analysts’ estimates and promoting Darren Huston to chief executive officer. Gap Inc. climbed 8.7% as its profit forecast beat expectations. Groupon Inc. jumped 5.8% 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 S&P 500 rose 0.9% to 1,763.59 at 3:15 p.m. in New York for the biggest gain since Oct. 16. The Dow Jones Industrial Average added 100.47 points, or 0.6%, to 15,694.45. Trading in S&P 500 stocks was 13% above the 30-day average during this time of the day.

“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.”

The S&P 500 dropped 1.3% 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.

Payrolls Data

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.

Today’s advance in the S&P 500 erased a 0.8% drop over past four days. The index has added 0.1% this week, poised to extend a stretch of four straight weeks of advances. The benchmark gauge has rallied 24% 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.

Higher 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 more than 160% from a 12-year low in 2009.

Among 449 S&P 500 companies that have announced results during the earnings season, 75% beat analysts’ estimates for profits, data 

 

compiled by Bloomberg show. Growth in fourth- quarter earnings will accelerate to 6.2% from 4.7% in the previous three months, analysts’ projections show.

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