By Rita Nazareth and Nikolaj Gammeltoft - Feb 3, 2012 10:54 PM GMT+0700
Feb. 3 (Bloomberg) -- U.S. Secretary of Labor Hilda Solis discusses the January employment report and outlook for an agreement to extend the payroll tax cut. Solis speaks with Betty Liu and Peter Cook on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Feb. 3 (Bloomberg) -- Employment climbed more than forecast in January and the U.S. jobless rate unexpectedly fell to the lowest in three years, casting doubt on whether the Federal Reserve can wait until 2014 before raising interest rates. The 243,000 increase in payrolls was the most since April and exceeded all forecasts in a Bloomberg News survey, Labor Department figures showed in Washington. The unemployment rate dropped to 8.3 percent, the lowest since February 2009. Peter Cook and Michael McKee report on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Feb. 2 (Bloomberg) -- Thomas Higgins, global macro strategist at Standish Mellon Asset Management, talks about investment strategy for Europe. Higgins, speaking with Sara Eisen and Scarlet Fu on Bloomberg Television's "InsideTrack," also discusses the outlook for China's economy. (Source: Bloomberg)
Feb. 3 (Bloomberg) -- John Taylor, founder, chairman and chief executive officer of FX Concepts LLC, talks about the outlook for the U.S. dollar and the euro. Taylor, speaking with Sara Eisen on Bloomberg Television's "InsideTrack," also discusses the European sovereign-debt crisis and investment strategy. (Source: Bloomberg)
Feb. 3 (Bloomberg) -- Steen Jakobsen, chief economist at Saxo Bank A/S, discusses the outlook for Europe's sovereign debt crisis and the U.S. economy. He speaks with Susan Li on Bloomberg Television's "Asia Edge." (Source: Bloomberg)
Stocks surged, extending the best start to a year for the Standard & Poor’s 500 Index since 1989, and Treasuries slid as better-than-forecast growth in U.S. jobs bolstered optimism in the economy. Lead, aluminum and cotton led commodities higher while gold, silver and natural gas fell.
The Standard & Poor’s 500 Index increased 1.3 percent to 1,342.2 at 10:52 a.m. in New York and is up 6.7 percent in 2012. The Stoxx Europe 600 Index extended gains after the jobs report, rising 1.5 percent. Yields on 10-year U.S. Treasury notes climbed nine basis points to 1.92 percent. The Dollar Index (DXY) rose 0.3 percent amid speculation the Federal Reserve has less reason to add another round of asset purchases to bolster growth.
The S&P 500 is poised for a fifth straight weekly gain, its longest streak in a year, and the Dow Jones Industrial Average is trading above its highest closing level since 2008. The 243,000 increase in payrolls was the most since April and exceeded all forecasts in a Bloomberg News survey, Labor Department figures showed. The unemployment rate dropped to 8.3 percent, the lowest since February 2009. Equities extended gains after a gauge of service industries also showed faster-than- forecast growth.
“Wow,” James Dunigan, who helps oversee $107 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “The jobs report confirms that this recovery is stronger than many people think. It speaks well to what earnings will be going forward and to what the possibilities are for equities. The riskier assets may turn out to be the ones with less risk.”
Cyclicals Lead
Gains in stocks today were led by companies that are most- dependent on economic growth, with gauges of financial, industrial and consumer-discretionary stocks climbing more than 1.3 percent to lead an advance in nine of the 10 main industries in the S&P 500. Bank of America Corp., Caterpillar Inc. (CAT) and Walt Disney Co. jumped more than 2 percent for the biggest gains in the Dow.
The median projection in the Bloomberg survey called for payrolls to rise by 140,000. Revisions added a total of 60,000 jobs to payrolls in November and December. The so-called underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 15.1 percent from 15.2 percent.
ISM Beats
Equities extended gains after service industries in the U.S. expanded in January at the fastest pace in almost a year, pointing to strength in the biggest part of the economy. The Institute for Supply Management’s non-manufacturing index rose to 56.8, topping the median forecast of 77 economists surveyed by Bloomberg News for a reading of 53.2.
The S&P 500 has rallied 21 percent since its 2011 low on Oct. 3 as the Federal Reserve pledged to keep interest rates low through 2014, economic data topped estimates and the European Central Bank provided cheaper lending to help banks. Companies added 170,000 workers to their payrolls in January, ADP Employer Services data showed Feb. 1.
Earnings beat projections at about two-thirds of the 264 companies in the S&P 500 that reported results since Jan. 9, according to data compiled by Bloomberg.
Profits 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. (SPX)
“If the strong jobs market continues we would be inclined to increase our expectations for earnings,” Tim Hoyle, director of research at Radnor, Pennsylvania-based Haverford Trust Co. which manages $6 billion, said in a phone interview. “This jobs report favors cyclical stocks over defensive stocks. It makes you rethink your balance between cyclically sensitive sectors versus the defensive sectors.”
European Shares
The Stoxx 600 has advanced 3.4 percent this week, the sixth gain in seven weeks. A gauge of U.K. services activity based on a survey of purchasing managers rose in January to 56, the highest since March, Markit Economics and the Chartered Institute of Purchasing and Supply said today.
Admiral Plc surged 8.2 percent, the biggest gain in three years, as the U.K. insurer extended its reinsurance partnerships. Temenos Group AG (TEMN) rallied 13 percent after Misys Plc said it’s in talks about merging with the Swiss maker of banking software.
Finance ministers of the AAA-rated countries using the euro -- Germany, Luxembourg, the Netherlands and Finland --meet today in Berlin. The gathering is part of a series of meetings convened by officials from the highest-rated euro states, a German Finance Ministry spokesman said, speaking on the customary condition of anonymity. Ministers will discuss current issues without briefing reporters.
Commodities, Euro
Seventeen of the 24 commodities in the S&P GSCI Index advanced, sending the gauge up 0.6 percent. Cotton rose 3.8 percent to 97.75 cents a pound and aluminum advanced 2.1 percent to $2,240 a metric ton. Crude oil added 1 percent to $97.36 a barrel.
The euro weakened 0.2 percent to $1.3112, extending its decline for the week to 0.8 percent.
The yield on Portuguese 10-year bonds slid 94 basis points to 13.89 percent. Greek 10-year bonds rose, sending the yield down 30 basis points to 34.07 percent. Deutsche Bank AG Chief Executive Officer Josef Ackermann may travel to Athens this weekend for talks over a swap involving Greek debt with a face value of about 200 billion euros ($263 billion).
European Rescue
A new rescue plan, which European officials and Greek creditors say may be wrapped up in coming days, includes a loss of more than 70 percent for bondholders in a voluntary exchange and loans likely to exceed the 130 billion euros now on the table.
The MSCI Emerging Markets Index gained 0.4 percent, for a weekly increase of 3.1 percent.
The Shanghai Composite Index rose 0.8 percent to extend a third straight weekly gain, its longest stretch in seven months amid speculation the central bank may lower reserve-ratio requirements. India’s Sensex increased for a fourth day, advancing 1 percent.
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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