By Saumya Vaishampayan
The Dow industrials and the S&P 500 pushed to record closes
Friday, capping their seventh week of gains, as investors cheered a
strong jobs report that underscored the health of the U.S.
economy.
Providing stocks room to run was a sense among investors that
the November jobs report wasn't enough to push the Federal Reserve
to raise interest rates sooner than expected. With U.S. inflation
low and slowing economic growth abroad, most investors don't expect
the Fed to lift rates until the second half of 2015.
The Dow gained 58.69 points, or 0.3%, to 17958.79. It rose
within striking distance of 18,000 during the session. The S&P
500 added 3.45 points, or 0.2%, to 2075.37.
The Nasdaq Composite Index rose 11.32 points, or 0.2%, to
4780.76.
The Dow has gained about 11% since its Oct. 16 low of 16117.24,
hitting several records in recent weeks. The gains have been fueled
by third-quarter earnings that were viewed as broadly positive and
improving U.S. economic data. The U.S. is on track to post its
strongest year of job growth since 1999. Also helping to make
stocks appear more attractive are easing efforts by major central
banks, which will maintain pressure on already low global interest
rates.
"The strong labor report, on the heels of the strong GDP numbers
that we've seen lately in the U.S., is validating this robust
economic environment," said Joe Spinelli, head of Americas
single-stock trading at Deutsche Bank. "That is increasing people's
conviction that the market should rally into year-end," he
said.
In 117 years, the Dow has gained during the month of December 84
times.
The Labor Department reported that nonfarm payrolls rose 321,000
last month, the strongest month of hiring since January 2012.
Economists surveyed by The Wall Street Journal expected the
creation of 230,000 jobs in November. Payroll gains in September
and October were revised higher to show that U.S. employers added
44,000 more jobs than previously estimated.
The jobs report reinforced the case for stocks going higher,
said Kate Warne, investment strategist at Edward Jones. "More jobs
mean more consumer spending," she said. "That means better overall
growth and earnings, which is good news for stocks."
Stocks can continue to gain even when the Fed begins to raise
short-term interest rates, according to Bernie Williams, chief
investment officer of USAA Investment Solutions, which oversees
about $22 billion. A "1% fed funds rate isn't going to kill" the
rally, he said. "Even if we're raising rates, we're still in a
situation where Europe is about to undergo [quantitative
easing]...so the world is still very stimulative," he added.
Financial stocks rose the most on the S&P 500, pushing the
sector up 1%. J.P. Morgan Chase & Co. and Goldman Sachs Group
Inc. led the Dow higher.
Stocks in the utilities sector, which are often viewed as
proxies for bonds, fell 0.8%.
David Chalupnik, head of equities for Nuveen Asset Management,
said he has been adding to positions in sectors that would benefit
from improving U.S. economic growth and lower oil prices.
"We have been adding to our consumer discretionary holdings and
our holdings of industrials that primarily operate here in the
U.S.," he said. In the consumer discretionary sector, he said he
bought companies involved in recreational products, such as boats
and motorcycles. He also has bought or added to positions in
industrial companies tied to the trucking sector, which could see
an uptick in activity and benefit from lower oil prices.
The dollar jumped to fresh highs against the euro and the yen
after the jobs report, highlighting traders' expectations that the
Fed will raise short-term interest rates in 2015, even as the Bank
of Japan is ramping up its easing steps and the European Central
Bank is expected to soon take its own new stimulus measures.
Bets that the Fed will raise rates at its Sept. 2015 policy
meeting rose to 72% in the wake of the strong November jobs report,
from 56.9% Thursday, based on pricing for federal funds rate
futures from the CME Group. Odds for a June move rose to 32% from
22.3%.
Bond prices fell as the affirmation of steady economic growth in
the U.S. sapped investors' appetite for safe-haven U.S. Treasurys.
The benchmark 10-year note yield rose to 2.306%. When bond yields
rise, prices fall.
"If we have two or three more strong jobs reports like this, it
increases the chance that the Fed would raise interest rates sooner
than many have thought," said Gary Pollack, who helps oversee $12
billion as head of fixed-income trading in New York at Deutsche
Bank AG 's private wealth management unit.
Gold, another traditional safe haven, also declined. Gold
futures declined 1.4% to $1,190.10 an ounce.
Crude-oil futures fell 1.5% to $65.84 a barrel. Energy stocks on
the S&P 500 fell 1.2%.
Stocks rose in Europe, with the Stoxx Europe 600 index up
1.8%.
In corporate news, Dollar Tree Inc. said its pending $8.5
billion acquisition of Family Dollar Stores Inc. could close as
early as February. Dollar Tree said it would have to shed a small
number of stores for antitrust approval of the deal. Shares of
Dollar Tree fell 1.2%, while those of Family Dollar inched up
0.1%.
Shares of Google Inc. fell 2.7%. Bank of America Merrill Lynch
cut the company to a neutral rating from buy.
Min Zeng contributed to this article.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
Access Investor Kit for Dollar Tree, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US2567461080
Access Investor Kit for Family Dollar Stores, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US3070001090
Access Investor Kit for Google, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US38259P5089
Access Investor Kit for Google, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US38259P7069