Stocks soar on strong July job report

PALLAVI GOGOI

AP Busi­ness Writer

NEW YORK — A surge in hir­ing last month got a big wel­come on Wall Street Friday.

The Dow Jones indus­trial aver­age surged 217.29 points to close at 13,096.17, end­ing a four-day los­ing streak. It was the best day for the Dow since June 29.

Mar­kets had been slump­ing all week after cen­tral banks in the U.S and Europe took no new action to shore up the econ­omy, as investors had hoped.

The Labor Department’s closely watched monthly jobs report gave investors assur­ance that the U.S. econ­omy may be doing bet­ter on its own. U.S. employ­ers added 163,000 jobs last month, far more than the 100,000 econ­o­mists were expect­ing. From April through June, the econ­omy added an aver­age of just 73,000 jobs a month, com­pared with an aver­age of 226,000 in the first three months of the year.

“It’s one step for­ward,” said Joe Bell, senior equity ana­lyst at Schaeffer’s Invest­ment Research. “But we would like to see con­tin­ued improve­ment in the labor mar­ket in com­ing months.”

There was more to cheer about from the ser­vice sec­tor, which employs 90 per­cent of all Americans.

The Insti­tute for Sup­ply Man­age­ment reported that U.S. ser­vice com­pa­nies grew at a slightly faster pace in July. The ISM’s ser­vices index rose to 52.6 from 52.1 in June, which was the low­est read­ing since Jan­u­ary 2010. Any read­ing above 50 means that busi­ness is grow­ing for ser­vice providers.

The good eco­nomic news caused investors to sell low-risk assets like U.S. gov­ern­ment debt. The sell­ing drove prices down and yields up. The bench­mark 10-year Trea­sury note was yield­ing 1.57 per­cent, up from 1.48 per­cent Thursday.

Oil prices also rose as investors became more opti­mistic about the econ­omy. Bench­mark crude shot up $4.27 to $91.40 on the New York Mer­can­tile Exchange.

The broader Stan­dard & Poor’s 500 index rose 25.99 points to 1,390.99, and the Nas­daq com­pos­ite index added 58.13 points to 2,967.90.

Despite the gain in hir­ing, there were still enough signs of weak­ness in the lat­est jobs report to keep hope alive that the Fed­eral Reserve may still take more steps to kick-start the econ­omy at its next meet­ing in Sep­tem­ber. A sep­a­rate sur­vey of house­holds by the Labor Depart­ment found that the unem­ploy­ment rate rose to 8.3 per­cent in July from 8.2 per­cent in June.

“I’m not ready to declare vic­tory just yet,” said Uri Lan­des­man, pres­i­dent of hedge fund Plat­inum Part­ners. “Lend­ing activ­ity is still pretty low because banks aren’t tak­ing that much risk, and it’s hard for an econ­omy to expand when banks are on ten­ter­hooks themselves.”

At the end of a two-day pol­icy meet­ing on Wednes­day, the Fed said it would take action on the econ­omy “as needed to pro­mote a stronger eco­nomic recov­ery.” On Thurs­day, mar­kets fell sharply after the Euro­pean Cen­tral Bank didn’t announce spe­cific plans to tackle the continent’s debt cri­sis, as many investors expected it would.

Sev­eral U.S. com­pa­nies turned in strong earn­ings reports on Fri­day. Proc­ter & Gam­ble, which makes Tide, Bounty, NyQuil and many other con­sumer prod­ucts, reported a 45 per­cent surge in quar­terly earn­ings, eas­ily beat­ing Wall Street’s fore­casts. P&G’s stock rose $1.99 to $65.50.

Other stocks mak­ing big moves included:

— Knight Cap­i­tal leapt 57 per­cent after the com­pany obtained an emer­gency credit line, accord­ing to news reports. The trad­ing firm was respon­si­ble for stock mar­ket dis­rup­tions on Wednes­day which will cost it $440 mil­lion. The stock had fallen 75 per­cent over the pre­vi­ous two days. On Fri­day, the stock rose $1.47 to $4.05.

— LinkedIn shot up $15 to $108.51. The social media com­pany reported that its second-quarter rev­enue increased faster than ana­lysts had expected. LinkedIn also raised its full-year rev­enue forecast.

— Kraft Foods rose $1.57 to $40.51 after report­ing a 5 per­cent jump in its second-quarter profit. Higher prices helped off­set a drag from raw-materials costs and cur­rency exchange rates.

— Zip­car plum­meted $3.88 to $6.75. The stock reached an all-time low Fri­day after the car-sharing net­work reported lower-than-expected rev­enue in the sec­ond quar­ter and cut its annual rev­enue estimates.

Posted by AP News on Aug 3 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.