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U.S. Stocks Rally as Dow Climbs Above 14,000 on Jobs Data

By Lu Wang and Sarah Pringle
February 01, 2013 4:36 PM EST 132 Comments

U.S. stocks rallied, sending the Dow Jones Industrial Average above 14,000 for the first time in five years, as data on the labor market and manufacturing boosted confidence in the world’s biggest economy.

All 10 industry groups in the Standard & Poor’s 500 Index advanced. Financial shares climbed 1.4 percent as Bank of America Corp. rallied 3.5 percent. Tyson Foods Inc. gained 3.1 percent after profits topped forecasts. Zoetis Inc., the animal- health company owned by Pfizer Inc., surged 19 percent in its debut. Merck & Co. slipped 3.3 percent after forecasting a drop in profit this year.

The S&P 500 climbed 1 percent to 1,513.17 at 4 p.m. in New York, returning to a five-year high. The index rose 0.7 percent for the week, marking the fifth straight weekly gain. The Dow rose 149.21 points, or 1.1 percent, to 14,009.79 today. About 6.9 billion shares traded hands on U.S. exchanges today, or 11 percent above the three-month average.

“The market is greeting the jobs numbers very happily,” Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas Asset Management LLC in Norfolk, Virginia, which oversees $2.3 billion, said in a phone interview. “The U.S. economy continues to benefit from the two in particular very positive trends” in manufacturing and real estate, he said.

Equities rallied as Labor Department figures showed payrolls rose 157,000 following a revised 196,000 advance in the prior month and a 247,000 surge in November. The jobless rate increased to 7.9 percent from 7.8 percent. Other reports showed manufacturing in the U.S. expanded more than forecast in January, reaching a nine-month high, while confidence among American households unexpectedly rose.

GDP Report

U.S. equity benchmark indexes slipped from five-year highs earlier in the week as a report showed U.S. gross domestic product unexpectedly shrank in the fourth quarter.

“You’re going to see this economy driven by capital being put to work,” Robert Lutts, president and chief investment officer of Cabot Money Management in Boston, which manages $500 million, said in a phone interview. “The glass is definitely more half full than empty today, and I think a lot of folks are still thinking it’s not half full. They’re wrong.”

Including dividends, the S&P 500 rallied 5.2 percent last month for its best January return since 1997, leading global stocks higher and beating bonds, commodities and currencies. About $2.6 trillion was added to the value of equities worldwide last month as earnings from companies including Goldman Sachs Group Inc. beat estimates and U.S. lawmakers forged a deal to avert the so-called fiscal cliff of automatic spending cuts and tax increases.

2007 Peak

The S&P 500 is 3.3 percent below its record of 1,565.15 set in October 2007, while the Dow is about 1.1 percent from its all-time high of 14,164.53. The 30-member (INDU) gauge has more than doubled from a 12-year low in 2009 as the Federal Reserve introduced an unprecedented three rounds of bond purchases to keep interest rates low and spur growth.

The Russell 2000 (RTY) Index of small companies advanced 1 percent to a record today. The Dow Jones Transportation Average, which hit an all-time high this week, increased 0.9 percent.

Phone, financial and raw-material companies climbed the most among 10 S&P 500 industry groups, rising at least 1.2 percent. The Morgan Stanley Cyclical Index gained 1 percent. The Chicago Board Options Exchange Volatility Index (VIX), which measures the cost of using options as insurance against declines in the S&P 500, tumbled 9.7 percent to 12.90.

The KBW Bank Index (BKX) of 24 stocks jumped 1.7 percent. Bank of America rallied 3.5 percent to $11.71, for the biggest advance in the Dow.

Earnings Season

Tyson is among 14 companies in the S&P 500 that reported earnings today. About 73 percent of the 254 companies from the gauge that have released results this earnings season have exceeded profit projections, and 65 percent have beaten sales estimates, according to data compiled by Bloomberg.

The largest U.S. meat processor climbed 3.1 percent to $22.80, after reporting first-quarter profits that beat expectations. Tyson also forecast full-year sales of about $35 billion, compared with the $34.7 billion average of 13 analysts’ estimates compiled by Bloomberg.

Perrigo Co. gained 4.8 percent to $105.28. The largest U.S. maker of generic over-the-counter drugs reported quarterly sales that beat analyst forecasts for the first time in a year. Second-quarter profit excluding some items was $1.36 a share, beating analysts’ estimates for a 16th straight quarter.

Chubb Corp. (CB) rose 3.2 percent to a record $82.89. The insurer of businesses and high-end properties said it would repurchase as much as $1.3 billion of shares after fourth- quarter profit exceeded analysts’ estimates.

Zoetis IPO

Zoetis surged 19 percent to $31.01 after raising $2.24 billion in its initial public offering. Pfizer offered about 17 percent of Zoetis in the IPO, the biggest in the U.S. since Facebook Inc.’s last year. The price values Zoetis at $13 billion, making it the largest public company of its kind and one of the few focused solely on medicines for animals. Pfizer added 1.3 percent to $27.63.

Verizon Communications Inc. added 2.2 percent to $44.56. The second-largest U.S. phone company may win market share and boost stock buybacks, Christopher Larsen, an analyst with Piper Jaffray Cos., wrote in a note. He raised Verizon’s rating to overweight, or an equivalent of buy, from neutral.

Merck slipped 3.3 percent to $41.83 for the biggest loss in the Dow. The second-largest U.S. drugmaker forecast profit will decline this year as competition from generic drugs reduces earnings from its top-selling Singulair product.

National Oilwell Varco Inc. fell 3.9 percent to $71.26. The biggest U.S. maker of oil-field equipment said the profit margin in its largest business unit will grow more slowly than expected amid sluggish demand for U.S. hydraulic fracturing.

Legg Mason Inc. (LM) sank 3.1 percent to $26.79. The money manager searching for a new chief executive officer posted its biggest quarterly loss since 2008 after client withdrawals and declining assets prompted the firm to write down the value of its holdings.

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Sarah Pringle in New York at springle1@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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