U.S. Stocks Advance on Drop in Jobless Claims, Cisco Earnings

By Sapna Maheshwari

Nov. 5 (Bloomberg) -- U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a fourth day, as jobless claims and worker productivity beat forecasts and Cisco Systems Inc. said a global economic recovery spurred a rebound in sales.

Cisco, the biggest maker of networking equipment, gained 2.4 percent after earnings topped analysts’ estimates and the company expanded its stock buyback plan by $10 billion. Research In Motion Ltd. rose after saying it will repurchase as much as $1.2 billion in shares. All but one of the 30 stocks in the Dow Jones Industrial Average rose as government data showed initial claims for unemployment benefits dropped to 512,000 last week and worker productivity surged at the fastest pace in six years.

The S&P 500 added 0.7 percent to 1,053.47 at 9:36 a.m. in New York. The Dow increased 89.7 points, or 0.9 percent, to 9,891.84. About six stocks advanced for each that fell on the New York Stock Exchange.

“We’ve actually seen more good news than bad across a broad spectrum of economic data,” said Art Hogan, the chief market analyst at New York-based Jefferies & Co. “We look at the initial jobless claims as another piece of economic data we’re pretty happy with,” he said. “The most important thing is the non-farm productivity number."

Nine of 10 industry groups in the S&P 500 advanced as the decrease in unemployment claims signaled that job losses are slowing as the economy begins to recover. The Labor Department’s measure of worker output jumped at a 9.5 percent annual rate, topping the highest estimate of economists surveyed by Bloomberg, as labor costs fell 5.2 percent to cap the biggest 12-month decrease since records began in 1948.

Tomorrow’s Jobs Report

The jobless claims data helped ease concern that rising unemployment will stifle the economy’s rebound. The government is projected to report that payrolls fell by 175,000 workers last month, according to the median of estimates in a Bloomberg News survey before tomorrow’s Labor Department report. The jobless rate probably climbed to 9.9 percent, the highest since 1983, according to the survey.

The S&P 500 has surged 56 percent from a 12-year low in March after $11.6 trillion in government spending, lending and guarantees returned the economy to growth following four straight quarters of contraction. The index is trading at more than 21 times earnings, according to weekly data compiled by Bloomberg. That’s near the highest level since July 2002.

Cisco added 2.6 percent to $23.90. The company’s net income fell 19 percent to $1.79 billion, or 30 cents a share, in the first quarter, which ended Oct. 24. Excluding stock compensation and some other costs, profit was 36 cents, beating the 31-cent average estimate in a survey of analysts.

‘Very Optimistic’

Cisco Chairman and Chief Executive Officer John Chambers, one of the first technology leaders to herald the recession two years ago, said he now sees a global economic recovery, fueling a rebound in his company’s sales this quarter.

‘‘Cisco is talking about a recovery around the world, Chambers is being very optimistic and people listen to him,” said William Dwyer, chief investment officer at Baltimore-based MTB Investment Advisors, which oversees $13 billion. “People are a little cautious, they like what they’re seeing, but there’s an awful lot built into the market.”

Earnings have exceeded the average analyst estimate at 81 percent of S&P 500 companies that have reported third-quarter results so far, according to data compiled by Bloomberg. That would mark the highest full-quarter proportion in data going back to 1993.

Research In Motion, Whole Foods

Research In Motion, the maker of the BlackBerry phone, added 3.1 percent to $59.37.

Whole Foods Market Inc. slid 9.6 percent to $28.99. The natural-food grocer forecast full-year earnings of as little as $1.05 a share, trailing the average estimate of $1.11 from analysts in a Bloomberg survey.

U.S. stocks yesterday erased most of a 156-point rally in the Dow average after a House bill to curb credit-card rates spurred concern about bank earnings, outweighing the Federal Reserve’s plan to keep interest rates at a record low.

The Bank of England slowed the pace of bond purchases as signs of an economic recovery give policy makers scope to wind down their money-printing program next year. The European Central Bank may signal it’s moving closer to withdrawing emergency stimulus measures after leaving its benchmark interest rate at a record low today.

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To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net.