October 3, 2014
Dow jumps 200 pts on job gains; Gold, bonds fall
NEW YORK (AP) — The Dow Jones industrial average jumped more than 200 points Friday in late afternoon trading after a surge in hiring by U.S. employers added to evidence that America’s economy is strengthening, even as other countries stumble.
The good news pushed up the value of the dollar against other major currencies to the highest level in four years. U.S. bonds and gold fell as investors anticipated higher interest rates.
KEEPING SCORE: The Dow rose 214 points, or 1.3 percent, to 17,015 as of 3:12 p.m. Eastern time. The index is on track for its third 200-point move in a little over a week as markets turn more volatile.
The Standard & Poor’s 500 index climbed 23 points, or 1.2 percent, to 1,969. The Nasdaq composite rose 55 points, or 1.2 percent, to 4,485. Even with the gains, all three indexes are headed for a second week of losses.
ANALYST’S TAKE: “The solid payroll report is great for economic growth and stock prices,” said Anastasia Amoroso, global market strategist at J.P. Morgan Funds. “The U.S. really stands out” from the rest of the world.
STRONG HIRING: U.S. employers added 248,000 jobs in September, beating market expectations of a 215,000. The hiring helped drive down the unemployment rate to 5.9 percent, the lowest since July 2008. Hiring in July and August was also stronger than initially estimated, the Labor Department said.
GOLDILOCKS: Investors like the jobs report because it showed the economy is strengthening, but perhaps not so much to drive up inflation and force the Federal Reserve to raise interest rates quickly. One key to low inflation: few pay raises. Average hourly wages barely budged last month, the Labor Department reported. Wages are now up just 2 percent in the past year.
Most economists predict the Fed will wait until mid-2015 to start raising rates, then proceed slowly. The central bank’s low-rate polices have helped keep borrowing rates low for consumers and businesses.
EUROPE’S STRUGGLES: The good U.S. news contrasts with troubling signs in Europe. On Thursday, the European Central Bank disappointed investors by not announcing details of more stimulus measures as the 18-country eurozone once again teeters on recession. Stocks rose there on Friday, but major European indexes are still down sharply for the week.
DOLLAR SPIKES: The U.S. Dollar Index, which measures the dollar against six other major currencies, surged 1.1 percent to its highest level in more than four years. The euro fell 1.3 percent to $1.2511 while the dollar gained 1.3 percent to 109.84 yen.
STOCK VALUES: The big job gains could mean more people buying things and higher company profits. Investors will get a better clearer of view of profits next week when aluminum maker Alcoa reports results and kicks off the unofficial start to corporate earnings season. Financial analysts expect earnings per share for the S&P 500 to rise 6.8 percent from a year earlier, then surge 12 percent the next quarter and for all of next year, according to S&P Capital IQ, a research firm.
The S&P 500 seems reasonably valued, if you buy those bullish forecasts. The index is trading at 15.6 times its expected earnings per share over the next 12 months, according to S&P Capital IQ. That is only a point higher — that is, more expensive — than the long-term average.
DRUG HIGHS: Shares of Mylan jumped 9 percent after the generic drugmaker raised its outlook for the third quarter and year. The stock rose $4.07 to $50.57. Salix Pharmaceuticals rose 3.2 percent. The company gained on news it is scrapping its merger with the subsidiary of an Italian drugmaker after the U.S. created new limits on the tax benefits of incorporating overseas. The stock was up $4.91 to $156.
HONG KONG: Hong Kong’s Hang Seng index erased an early loss and closed up 0.6 percent, even as pro-democracy protests continue. Stocks rallied after Chief Executive Leung Chun-ying offered talks with protesters, who oppose plans to require candidates in the 2017 election to be approved by a panel dominated by pro-Beijing business leaders. Protesters say the communist mainland government is reneging on a promise of “universal suffrage” for the territory. Stocks in retailing and tourism have plunged, but analysts say the economic impact of the protests is limited.
ENERGY: The price of oil fell despite data showing a stronger U.S. economy. That data pushed up the value of the dollar, which makes oil more expensive to buyers using other currencies because it is priced only in dollars.
Benchmark U.S. crude fell $1.27 to close at $89.74 a barrel on the New York Mercantile Exchange, its lowest level since April of 2013. Brent crude, a benchmark for international oils used by many U.S. refineries, fell $1.11 to close at $92.31 on the ICE Futures exchange in London.
In other energy futures trading on the NYMEX, wholesale gasoline fell 3 cents to close at $2.379 a gallon, heating oil fell 2.2 cents to close at $2.616 a gallon and natural gas rose 10.7 cents to close at $4.039 per 1,000 cubic feet.
GOLD AND BONDS: Prices for gold and Treasurys fell as traders moved money out of assets that are considered safer. Gold fell $22.20, or 1.8 percent, to $1,192.90 an ounce. Silver fell 22 cents to $16.83 an ounce and copper was flat at $3 a pound. The yield on the 10-year Treasury note rose to 2.45 percent from 2.43 percent on Thursday.