Dow Rallies to Highest Level Since 2008 on Jobs Report

By Rita Nazareth - Feb 3, 2012 10:24 PM GMT+0700
Enlarge image

Traders work on the floor of the New York Stock Exchange (NYSE) in New York. Photographer: Jin Lee/Bloomberg

Play Video

Feb. 3 (Bloomberg) -- Kate Moore, senior global equity strategist at Bank of America Merrill Lynch, discusses the outlook for global markets and investment strategy. Moore speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

U.S. stocks advanced, sending the Dow Jones Industrial Average toward its highest level since May 2008, after a report showed that employment growth topped estimates and the jobless rate unexpectedly fell to 8.3 percent.

Bank of America Corp. (BAC), Caterpillar Inc. (CAT) and FedEx Corp. (FDX) rallied at least 1.5 percent to pace gains among companies most- dependent on economic growth. Alcoa Inc. (AA) and Occidental Petroleum Corp. (OXY) added more than 1.9 percent as commodity producers advanced. Tyson Foods Inc. (TSN) rose 5.5 percent as profit beat estimates. Gilead Sciences Inc. surged 9.1 percent on positive data from an experimental hepatitis C drug.

The Standard & Poor’s 500 Index rose 1.3 percent to 1,342.27 at 10:22 a.m. New York time. The benchmark gauge has climbed 2 percent since Jan. 27, poised for a fifth straight weekly increase. The Dow Jones Industrial Average added 152.89 points, or 1.2 percent, to 12,858.30 today.

“Spectacular,” Ron Florance, managing director of investment strategy for Wells Fargo Private Bank, said in a telephone interview from Phoenix. His firm manages $169 billion. “It’s a very, very strong jobs number. It shows that companies have confidence that they see global demand growth through their products and services. The numbers indicate continued economic strength. That will support risk assets.”

The 243,000 increase in payrolls was the most since April and exceeded all forecasts in a Bloomberg News survey. The unemployment rate dropped to 8.3 percent, the lowest since February 2009. The median projection in the Bloomberg survey called for an increase of 140,000 payrolls. The Institute for Supply Management’s index of non-manufacturing industries, which account for almost 90 percent of the U.S. economy, rose to 56.8 in January from 53 a month earlier.

Earnings Outlook

Earnings in the S&P 500 are forecast to rise 9 percent this year to $104.68, according to analyst estimates compiled by Bloomberg. At yesterday’s close of $104.68, the index is trading at 12.7 times projected earnings in 2012 and 11.2 times predictions for 2013. The benchmark gauge for American equities has traded at an average price-earnings ratio of 16.4 since 1954, according to data compiled by Bloomberg.

Companies most-tied to economic growth rallied. Bank of America gained 5.1 percent to $7.83. Caterpillar added 2.5 percent to $113.09. FedEx increased 1.5 percent to $94.14.

Energy and raw material producers gained as the S&P GSCI Index of commodities added 1.1 percent. Alcoa rose 2.1 percent to $10.64. Occidental Petroleum jumped 1.9 percent to $100.37.

Tyson Foods rose 5.5 percent to $19.64. The meat processor reported first-quarter earnings of 42 cents a share. On average, the analysts surveyed by Bloomberg estimated profit of 34 cents.

Gilead, Brocade

Gilead Sciences (GILD) rallied 9.1 percent to $53.78. The drugmaker that acquired Pharmasset Inc. last month for its experimental hepatitis C treatments said one of the therapies produced positive clinical trial results.

Brocade Communications Systems Inc. (BRCD) rose 1.7 percent to $5.93. Blackstone Group LP (BX), the world’s largest private-equity firm, is studying a leveraged buyout of the company, said a person with knowledge of the situation. While Blackstone is in talks with Brocade, which has been seeking a buyer since 2009, reaching a deal may be difficult, said the person, who declined to be identified because the matter isn’t public. Brocade, a maker of switches for data-storage networks, has a market value of $2.65 billion.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net