U.S. Stocks Rise as Payrolls Reach Pre-Recession Peak
New York — U.S. stocks rose Friday, extending records for equity benchmarks, as data showed payrolls pushed past their pre-recession peak for the first time in May.
Joy Global jumped 3.9 percent, rallying for a second day, as industrial shares advanced. Gap gained 2.1 percent as same-store sales for May beat analyst forecasts. Rally Software Development plunged 29 percent after the company forecast revenue below analysts’ projections. Hertz Global Holdings plummeted the most in seven months after saying it needs to fix three years of accounting.
The Standard & Poor’s 500 index added 0.5 percent to 1,949.44. The Chicago Board Options Exchange volatility index closed at its lowest level in seven years. The Dow Jones industrial average gained 88.17, or 0.5 percent, to 16,924.28. Both gauges closed at all-time highs. The Russell 2000 index climbed 1 percent. About 5.3 billion shares changed hands Friday on U.S. exchanges, 15 percent below the three-month average.
“The market likes this steady state of economic improvement,” Timothy Ghriskey, chief investment officer at Solaris Asset Management in New York, which helps manage about $1.5 billion in assets, said. “A really weak number would raise economic concerns that the economy is rolling over, and a too-strong number would cause concern about the Fed accelerating its tightening timetable. It’s a sweet spot for the market.”
The 217,000 advance in hiring was broad-based and followed a 282,000 gain in April, figures from the Labor Department showed. It marked the fourth consecutive month employment increased by more than 200,000, the first time that’s happened since early 2000. The jobless rate unexpectedly held at an almost six-year low of 6.3 percent.
“The entire employment market has gained back all the jobs we’ve lost since the recession,” Cameron Hinds, the Lincoln, Nebraska-based regional chief investment officer for Wells Fargo Private Bank, which has about $170 billion under management, said by phone. “The positive part is we’ve reached that milestone. The negative part is it took so long for us to get there.”
Federal Reserve officials are watching the labor market as they move to complete their bond-purchase program late this year and start considering the timing of the first interest-rate increase since 2006. Central-bank stimulus has helped propel the S&P 500 higher by 188 percent from its bear-market low in March 2009.
The Fed said in its Beige Book business survey last week that the economy expanded at a modest to moderate pace last month as auto sales led household spending and the labor market improved. The survey, released two weeks before policy makers meet in Washington, supports Chair Janet Yellen’s view that the economy is rebounding from a 1 percent contraction in the first quarter caused largely by harsh winter weather.
The S&P 500 rallied 0.7 percent Thursday as European Central Bank President Mario Draghi unveiled new plans to stimulate the region’s economy, including reducing the deposit rate to minus 0.1 percent from zero.
A worsening in the euro area’s economic outlook and a prolonged spell of slow inflation prompted the ECB to act to preserve the fragile recovery in the world’s second-largest economy.
“Even as the Fed has started to tighten its monetary policy, the rest of the world is still easing,” Jerry Braakman, chief investment officer of First American Trust in Santa Ana, California, said by phone. His firm oversees $1.1 billion. “You still have a lot of central bank liquidity being pumped into the system. There is more upside than downside in the market now.”
The S&P 500 gained 1.3 percent for the week, the most since April. The gauge has rebounded 7.4 percent since a selloff in small-cap and Internet shares spread to the broader market, dragging the index to a two-month low in April. The measure trades at 16.5 times the projected earnings of its members, up from a multiple of 14.8 in early February.
The Russell 2000 has also seen a recovery. The gauge has increased 6.3 percent since reaching a low in May. The technology-heavy Nasdaq 100 index is at the highest level in more than 13 years, while the Nasdaq composite index is 0.3 percent below a 14-year high reached in March.
The CBOE volatility index fell 8.1 percent to 10.73 Friday. The gauge of U.S. equity volatility known as the VIX closed at the lowest level since February 2007.
Seven of 10 major industries in the S&P 500 rose, with industrial and energy shares gaining the most. Health care and utilities companies declined.
Joy Global climbed 3.9 percent to $64.11. The maker of mining equipment was raised to buy from neutral by Bank of America Merrill Lynch. The company rallied 6.7 percent Thursday after posting second-quarter earnings that topped forecasts and said it sees global growth driving demand for commodities.
Gap gained 2.1 percent to $42.06. The biggest apparel-focused retailer in the United States said sales in May increased 1 percent. That beat the median analyst forecast of 0.3 percent.
Angie’s List increased 11 percent to $11.21. The consumer-review website was raised to buy from neutral at Bank of America.
Rally Software plunged 29 percent to $8.71. The provider of tools and services for managing software-development projects late Thursday forecast second-quarter revenue of $20.2 million to $20.8 million, compared with the $22.3 million analysts had projected.
Hertz Global tumbled 9.1 percent to $27.73, the most since November. The car- and equipment-rental company that’s splitting in two said it needs to fix three years of accounting and that quarterly results won’t meet consensus estimates.