Stocks rise to highest level since May after jobs report

NEW YORK – U.S. stocks rose, sending the Standard & Poor’s 500 Index toward the highest level since May, after data showed payrolls climbed more than forecast even as the jobless rate unexpectedly rose to a five-month high.

Bank of America Corp., Alcoa Inc. and Caterpillar Inc. added at least 2.4 percent. Knight Capital Group Inc. surged 29 percent, after tumbling 75 percent in two days, on a report it secured a credit line. Kraft Foods Inc., the food producer that will split in two, and Procter & Gamble Co., the consumer products company targeted by activist investor Bill Ackman, rose more than 3.5 percent on better-than-estimated earnings.

About six stocks gained for each that fell on U.S. exchanges at 11:36 a.m. New York time. The S&P 500 advanced 2 percent to 1,392.32, after dropping 1.5 percent in four days. The Dow Jones Industrial Average added 239.84 points, or 1.9 percent, to 13,118.72. Trading in S&P 500 companies was almost in line with the 30-day average at this time of day.

“The jobs report is neither here nor there,” said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion. “There’s not enough evidence for the Fed to act imminently. At the same time, the numbers are not so good, which means that Fed could still do something. On balance, the number was decent.”

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Equities gained as payrolls last month increased 163,000 following a revised 64,000 rise in June. Economists projected a gain of 100,000. Unemployment rose to 8.3 percent. The Institute for Supply Management’s index of U.S. non-manufacturing businesses, which covers about 90 percent of the economy, rose to 52.6 in July, beating estimates.

Uneven hiring

Uneven hiring may hold back consumer spending, the biggest part of the economy, as a global slowdown and impending U.S. tax changes weigh on businesses. Job cuts at companies from Morgan Stanley to Cisco Systems Inc. mean unemployment may remain elevated, one reason the Federal Reserve this week said it is prepared to take new steps if needed to boost growth.

“What I like about the jobs report is that it allows people like me, who have been patient with the domestic economy, to continue to be patient,” said Michael Shaoul, chairman of Marketfield Asset Management in New York, which oversees about $2.7 billion. “This alone won’t change the Fed’s mind.”

Stocks fell over the last four days as Fed Chairman Ben S. Bernanke and European Central Bank President Mario Draghi failed to reassure investors on immediate efforts to bolster growth. Members of German Chancellor Angela Merkel’s coalition parties signaled acceptance of the ECB’s plan to buy government bonds.

Alcoa, Caterpillar

Companies which are most-dependent on the pace of economic growth rallied. The Morgan Stanley Cyclical Index jumped 2.7 percent. All 10 groups in the S&P 500 advanced as commodity, industrial and financial shares had the biggest gains. Bank of America climbed 3.8 percent to $7.45. Alcoa rose 2.4 percent to $8.38. Caterpillar added 2.7 percent to $85.37.

Investors also monitored the latest developments with Knight Capital. The shares rallied 29 percent to $3.32 following a report the firm advised some clients it obtained a line of credit, easing concern the market maker will collapse following a $440 million loss from a software bug.

The credit line will allow the company to operate for the day and Knight asked firms to resume routing trades as usual, the Wall Street Journal reported. The newspaper cited people familiar with the matter. Knight spokeswoman Kara Fitzsimmons didn’t immediately respond to requests for comment.

The company opened its books to potential buyers, including private-equity firms and at least one securities-industry rival, as it seeks an investment or takeover to survive, said two people with knowledge of the matter.

Rescue talks

Knight is working with Goldman Sachs Group Inc. and Sandler O’Neill & Partners LP as advisers in the rescue talks, said one of the people, who spoke on condition of anonymity because the discussions are private. The company is under pressure to strike a deal within days, the people said.

“They need to do something fast,” said Peter Lenardos, an analyst at RBC Capital Markets in London. “There is a desperate need for capital, as Knight themselves acknowledge,” he said. “It might be private equity, it could be a big sell-side bank, it could be a peer like Citadel.”

Some earnings reports also helped drive stocks higher. About 73 percent of S&P 500 companies which reported quarterly results have beaten estimates, according to data compiled by Bloomberg. Sales missed estimates at 59 percent of companies.

Kraft rallied 4.3 percent, the most in the Dow, to $40.60. The producer of its self-named macaroni and cheese and Cadbury chocolates boosted prices to help recoup higher costs for commodities and mitigate the effect of the stronger dollar that reduced the value of sales overseas.

$10 billion

P&G gained 3.5 percent to $65.75. Chief Executive Officer Robert McDonald is working to prove his pricing and plan to save $10 billion by 2016 through cutting jobs and marketing will be enough to improve results. Last month, Ackman’s Pershing Square took a $1.8 billion stake in P&G, and people familiar with the matter said he plans to push for leadership changes.

LinkedIn Corp. added 12 percent to $104.54. The biggest professional-networking website forecast sales that topped estimates as it adds users and makes more money from recruitment services. Chief Executive Officer Jeff Weiner has lured subscribers and increased revenue from hiring services, the largest of the company’s three main product lines.

The first among social media companies to hold initial share sales since early 2011, LinkedIn has done a better job than consumer-focused peers Facebook Inc. and Zynga Inc. at wringing sales from a growing user base.

Facebook rebounds

Facebook, which has tumbled 45 percent since the company went public in May, rose 4.8 percent to $21. The shares yesterday dropped to a record low. The world’s largest social- networking service last week reported earnings that showed slowing growth.

EOG Resources Inc. gained 10 percent, the most in the S&P 500, to $106.14. The largest oil producer in Texas’ Eagle Ford shale lifted output forecasts and reported profit that surpassed analysts’ estimates.

CBS Corp. added 5.6 percent to $34.88. The owner of the most-watched television network reported an 8.1 percent increase in second-quarter profit, beating analysts’ estimates.

Morgan Stanley jumped 5.9 percent to $13.80. It should cut its fixed-income trading business in half and use the freed-up capital to buy back a quarter of its shares, said Ed Najarian, an analyst at International Strategy & Investment Group Inc.

The firm should cut its so-called risk-weighted assets by $150 billion under Basel III rules, about twice the reduction it currently plans, Najarian estimated yesterday in a research note. The larger reduction and buybacks could double Morgan Stanley’s stock price to about $27, he wrote. ‘Create value’

“With Morgan Stanley stock languishing at about 50 percent of tangible book value, and down more than 50 percent over the past three years, we think management needs to potentially embark upon a more aggressive strategic plan in an effort to create value for shareholders,” Najarian wrote.

Boeing Co. advanced 1.5 percent to $73.06. The company reached agreements to sell 94 of its single-aisle 737 planes to Asian carriers, including an accord with a Singapore Airlines Ltd. unit that has an all-Airbus SAS fleet. Separately, Boeing received a $460 million award from the National Aeronautics and Space Administration to develop spacecraft capable of carrying astronauts, the agency said.

Citizens Republic Bancorp Inc. jumped 5.6 percent to $18.62. The Michigan lender that has yet to repay a $300 million U.S. government bailout is soliciting takeover bids from competitors, said three people with knowledge of the matter.

Record low

Zipcar Inc. tumbled 36 percent to $6.79, a record low. The company that rents cars by the hour or day cut its forecast for sales this year as the pace of new members slowed.

Molycorp Inc. dropped 27 percent to $11.73. The U.S. owner of the largest rare-earth deposit outside China said it may cut capital expenditures and seek additional financing.

Activision Blizzard Inc. slid 3.2 percent to $11.39. The maker of the “Call of Duty” video game dropped after the Financial Times reported that majority owner Vivendi SA hasn’t attracted interest for its planned sale of its stake in the company.

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