Stocks rise to highest level since May after jobs report

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.
Posted 8/3/12

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.”

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.

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