U.S. Stocks Rise After Better-Than-Forecast Jobs Growth

U.S. stocks advanced, halting a five-day slide for the Standard & Poor's 500 Index, as investors weighed better-than-forecast jobs growth to gauge the strength of the economy and timing of Federal Reserve stimulus cuts.

Intel Corp. gained 2.8 percent after Citigroup Inc. advised investors to buy the stock. Sears Holding Corp. (SHLD) climbed 2 percent after the retailer said it plans to spin off its Lands' End mail order business. Rite Aid (RAD) Corp. added 2.8 percent after November sales at stores open more than a year rose more than analysts' estimated.

The S&P 500 (SPX) rose 0.9 percent to 1,800.33 at 9:59 a.m. in New York. The advance trimmed the index's drop this week to 0.3 percent after it had retreated 1.2 percent over the past four sessions. The Dow Jones Industrial Average gained 136.40 points, or 0.9 percent, to 15,957.91. Trading in S&P 500 stocks was 8 percent above the 30-day average at this time of day.

"It appears that the market is getting increasingly comfortable with a taper scenario that parallels an incrementally stronger economy," Jim Russell, who helps oversee $112 billion as a senior equity strategist for U.S. Bank Wealth Management, said by phone. "The higher number could more easily be accepted because the market had traded down, anticipating what was likely to be a stronger number today, and of course we got that."

The 203,000 increase in payrolls followed a revised 200,000 advance in October, the strongest back-to-back gain since February-March, Labor Department figures showed today. The median forecast of 89 economists surveyed by Bloomberg called for a 185,000 advance. A report Dec. 4 from the ADP Research Institute indicated companies boosted payrolls in November by the most in a year.

Unemployment Rate

The pickup in employment, combined with faster wage gains and more hours, provides American workers with the means to spend and signals companies are confident that demand will improve. The jobless rate fell to a five-year low of 7 percent.

A separate report today showed consumer spending rose more than forecast in October, a sign the biggest part of the economy is gaining momentum from a firming employment.

Household purchases, which account for about 70 percent of the economy, climbed 0.3 percent after a 0.2 percent increase the prior month, the Commerce Department reported today.

The Thomson Reuters/University of Michigan preliminary December consumer sentiment index rose to 82.5 from 75.1 in November, a report showed today. Economists forecast an increase to 76, according to the median estimate in a Bloomberg survey.

"The knee-jerk reaction is all that data looks pretty good,"Stephen J. Carl, principal and head equity trader at New York-based Williams Capital Group LP, said in a telephone interview. "We're filing five down days so perhaps you see a rally. However, this could also instill a taper mindset."

Taper Timing

The S&P 500 had fallen five straight sessions, its longest slump since September, as improving economic data fueled speculation the Fed will start paring its $85 billion in monthly bond purchases sooner than projected. The index has still surged more than 26 percent this year, heading for the biggest annual gain since 2003.

The Fed says it will consider slowing the pace of stimulus if the economy improves in line with its forecasts. In a Nov. 19 Bloomberg Global Poll, 80 percent of investors said they expected the central bank to delay a decision until at least March 2014. Policy makers next meet Dec. 17-18.

Data yesterday showed the economy expanded in the third quarter at a faster pace than initially reported, led by the biggest increase in inventories since early 1998. A separate report showed applications for U.S. employment benefits unexpectedly decreased last week.

Volatility Gauge

The monetary stimulus has helped propel the S&P 500 higher by as much as 167 percent since a bear-market low in March 2009. The rally has pushed valuations higher, with the gauge trading for about 16.8 times its companies' reported earnings, up 18 percent from the beginning of the year when it traded at 14.2 times profit.

The Chicago Board Options Exchange Volatility Index (VIX), the gauge of S&P 500 options known as the VIX, plunged 7.7 percent, halting a record eight-day rally that had added 23 percent to the measure.

All 10 main S&P 500 groups advanced at least 0.4 percent. Financial and industrial stocks paced gains, rallying 1.1 percent. American Express Co. (AXP) jumped 1.5 percent to $85.82 and Boeing Co. gained 1.4 percent to $134.58.

Intel jumped 2.8 percent to $24.94 for the biggest gain in the Dow. Citigroup raised its recommendation on the shares to buy from neutral, saying stability in corporate demand for personal computers will benefit the world's biggest chipmaker.

Lands' End

Sears climbed 2 percent to $51. The unprofitable retailer controlled by Edward Lampert plans to spin off Lands' End by distributing the company to shareholders. The distribution is subject to the approval of the board and certain other conditions, the Hoffman Estates, Illinois-based company said.

Rite Aid gained 2.8 percent to $5.77. The drug-store chain operator reported November same-store sales advanced 2.8 percent, surpassing the 2.1 percent median forecast by analysts in a Bloomberg survey.

Ulta Salon, Cosmetics & Fragrance Inc. plunged 20 percent to $94.62. The cosmetics and hair-care products retailer reported fourth-quarter profit and revenue forecasts that missed analysts' estimates.