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U.S. Stocks Snap Five-Day Drop on Jobs as Yen Weakens

By Nick Taborek and Callie Bost
December 06, 2013 4:33 PM EST 31 Comments
U.S. Stocks
U.S. Stocks

U.S. stocks rose for the first time in six days after American employers added more jobs than forecast and the jobless rate dropped to the lowest since 2008. Commodities climbed and the yen weakened.

The Standard & Poor’s 500 Index jumped 1.1 percent to 1,805.09 at 4 p.m. in New York, its biggest gain in a month. The Stoxx Europe 600 Index rallied 0.7 percent, rebounding from its lowest close since Oct. 14. Ten-year Treasury yields decreased 1.5 basis points to 2.86 percent after yesterday reaching the highest since September. The yen fell against all 16 major counterparts after the head of an advisory panel called on Japan’s pension fund to cut debt holdings. Cotton, cocoa and aluminum rose more than 1 percent to lead commodities higher while gold slid to a five-month low.

The U.S. jobless rate fell to 7 percent, showing progress in the labor market that will help provide a spark for the U.S. economy. The S&P 500 had fallen for five straight days, its longest slump since September, as improving economic data fueled concern the Federal Reserve will reduce its $85 billion in monthly bond purchases meant to suppress interest rates and bolster growth. The benchmark gauge of U.S. options prices retreated today after eight straight gains, matching a record streak.

“The market is getting increasingly comfortable with a taper scenario that parallels an incrementally stronger economy,” Jim Russell, who helps oversee $112 billion as a senior equity strategist for U.S. Bank Wealth Management, said by phone. “The higher number could more easily be accepted because the market had traded down, anticipating what was likely to be a stronger number today, and of course we got that.”

Jobs Data

The 203,000 increase in payrolls followed a revised 200,000 advance in October, Labor Department figures showed today. The median forecast of 89 economists surveyed by Bloomberg called for a 185,000 advance.

Another report showed consumer confidence rose more than forecast in December to the highest level in five months, easing concern about household spending heading into the holiday-shopping season. The Thomson Reuters/University of Michigan preliminary December consumer sentiment index rose to 82.5, the strongest since July, from 75.1 in November. Economists forecast an increase to 76, according to the median estimate in a Bloomberg survey.

Fed Stimulus

Two Federal Reserve regional bank presidents said yesterday any decision to taper bond buying should be accompanied by a limit on the size of the program or a timetable for ending it. Japan’s Government Pension Investment Fund should pare domestic bonds immediately, said Takatoshi Ito, chairman of the advisory group. Trading volumes of companies in the index were about 5.5 percent below the 30-day average.

Today’s gain brought the S&P 500 to about two points below its last record reached on Nov. 27.

Among stocks moving in the U.S., Intel Corp. gained 2.3 percent to lead the Dow Jones Industrial Average higher after Citigroup Inc. advised investors to buy the stock. Procter & Gamble Co., DuPont Co. and United Technologies Corp. climbed at least 1.9 percent as all 30 stocks in the Dow rose.

Gauges of commodity, industrial and consumer-staples shares rose more than 1.4 percent as all 10 of the main industry groups in the S&P 500 advanced. Rite Aid Corp. added 2.3 percent after November sales at stores open more than a year rose more than analysts’ estimated.

The Chicago Board Options Exchange Volatility Index, or VIX, fell 8.6 percent to 13.79. The gauge, which measures the cost of using options as insurance against losses in the S&P 500, surged 23 percent in the eight sessions before today. It hasn’t risen for nine consecutive days since records began in January 1990, data compiled by Bloomberg show.

‘Pretty Good’

The S&P 500 is heading for a 27 percent increase in 2013, challenging 2003 for its biggest advance in 15 years. Investors are seeking to gauge when the Fed will reduce stimulus amid signs of an improving U.S. economy. Reports yesterday showed the annualized growth rate in the third quarter rose the most since the first three months of 2012 and jobless claims unexpectedly declined last week.

“The knee-jerk reaction is all that data looks pretty good,” Stephen J. Carl, principal and head equity trader at New York-based Williams Capital Group LP, said in a telephone interview. “We’re filing five down days so perhaps you see a rally. However, this could also instill a taper mindset.”

The jobs data bolstered the case for the Fed to start reducing bond purchases, with economists saying the Federal Open Market Committee may start dialing down $85 billion in monthly buying at its Dec. 17-18 gathering rather than wait until January or March.

‘What Else’

“What else does the Fed have to see to buy at a slower rate?” said John Ryding, chief economist at RDQ Economics in New York who has worked at the Bank of England and the Federal Reserve Bank of New York. “If not now, when?’

The Stoxx 600 lost 3.3 percent in the five days through yesterday. The index fell 0.9 percent yesterday as European Central Bank President Mario Draghi said financial-market developments and low domestic demand may hurt the euro area’s economy. It rebounded 0.7 percent today after the U.S. jobs data, leaving it up 13 percent for the year.

The MSCI Emerging Markets Index advanced 0.5 percent. Thailand’s SET Index lost 1.1 percent as demonstrators seeking to oust Prime Minister Yingluck Shinawatra are expected to resume protests after a holiday yesterday.

Emerging Markets

South Africa’s rand rebounded 1.2 percent, after falling to the weakest level since 2009 against the dollar. The FTSE/JSE Africa All Share Index advanced 0.7 percent. The Johannesburg Stock Exchange paused all trading for 5 minutes today to mark the death of former President Nelson Mandela.

Ukraine’s benchmark stock index added 0.4 percent after tumbling 4.5 percent in the previous eight sessions. Police began arresting those it claims organized disturbances as anti-government protesters held out in freezing weather for a 15th day.

The yen slipped 1 percent to 102.84 per dollar, leaving it down 0.4 percent on the week. It touched 103.38 on Dec. 3, the weakest level since May. Japan’s currency dropped 1.3 percent to 140.94 per euro. The dollar weakened 0.3 percent to $1.37043 per euro.

Copper rose 0.8 percent to help lead industrial metals higher on the London Metal Exchange after Indonesia confirmed it will ban ore exports from next month. Aluminum added 1.2 percent as 17 of 24 commodities in the S&P GSCI Index advanced.

West Texas Intermediate oil, up 0.3 percent today at $97.66 a barrel, was headed for a 5.3 percent gain this week, the biggest advance in five months. Natural gas was little changed following yesterday’s 4.3 percent jump to a six-month high as forecasts pointed to colder U.S. temperatures.

To contact the reporters on this story: Nick Taborek in New York at ntaborek@bloomberg.net; Callie Bost in New York at cbost2@bloomberg.net

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

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