“This morning’s data on jobs doesn’t change the overall picture on the job market,” John Canally, economic strategist at LPL Financial Corp., said in a phone interview from Boston. His firm oversees about $414.7 billion. “This wasn’t a slam dunk report saying the Fed will taper in December. It’s the taper-no taper game, and this was the no-taper reaction.”
The S&P 500 had fallen five straight sessions, its longest slump since September, as improving economic data fueled speculation the Fed will start paring its $85 billion in monthly bond purchases sooner than projected. The index has still surged more than 26% this year, challenging 2003 for the biggest annual gain in 15 years.
The Fed says it will consider slowing the pace of stimulus if the economy improves in line with its forecasts. In a Nov. 19 Bloomberg Global Poll, 80% of investors said they expected the central bank to delay a decision until at least March 2014. Policy makers next meet Dec. 17-18.
Data yesterday showed the economy expanded in the third quarter at a faster pace than initially reported, led by the biggest increase in inventories since early 1998. A separate report showed applications for U.S. employment benefits unexpectedly decreased last week.
Bill Gross, manager of the world’s biggest bond fund, said the pace of jobs growth last month signals there is a 50% chance the Fed will taper this month.
“It’s at least 50-50 now,” Pacific Investment Management Co.’s Gross said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Mike McKee. “There was some logic for a January starting point, but it’s clear the Fed wants out.”
The monetary stimulus has helped propel the S&P 500 higher by as much as 167% since a bear-market low in March 2009. The rally has pushed valuations higher, with the gauge trading for about 16.8 times its companies’ reported earnings, up 18% from the beginning of the year when it traded at 14.2 times profit.