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U.S. Stocks Advance as Dow Tops 11,000 for First Time Since May
2010-10-08 15:36:26.441 GMT
By Rita Nazareth and Elizabeth Stanton
Oct. 8 (Bloomberg) -- U.S. stocks rose, sending the Dow
Jones Industrial Average above 11,000 for the first time since
before the May 6 crash, after a worse-than-estimated report on
American jobs bolstered speculation that the Federal Reserve
will enact economic stimulus measures.
Alcoa Inc. rallied 6.6 percent after reporting higher-than-
estimated earnings. CF Industries Holdings Inc., a fertilizer
maker, surged 9.4 percent as the Department of Agriculture cut
its corn crop estimate, while Tyson Foods Inc. slumped 7 percent
amid concern feed prices will rise. Adobe Systems Inc. sank 5.2
percent as the Wall Street Journal reported speculation that the
company may be acquired by Microsoft Corp. is "nonsense".
The S&P 500 gained 0.6 percent to 1,164.72 at 11:31 a.m. in
New York, above its highest close since May 12. The Dow gained
63.72 points, or 0.6 percent, to 11,012.3. The dollar slid below
82 yen for the first time since 1995 amid bets the Fed will
purchase more Treasuries, a tactic know as quantitative easing,
to inject cash into the economy.
"The data are highly disappointing in terms of both overall
levels and the compositional dynamics of job creation," Mohamed
A. El-Erian, chief executive at Pacific Investment Management
Co., which runs the world's biggest bond fund, wrote in an e-
mail to Bloomberg News. "They increase the probability of the
Fed implementing additional QE."
The S&P 500 rallied to the highest level since May on Oct.
5 amid speculation the Fed would join the Bank of Japan in
taking steps to safeguard the economic recovery. The index is
still down 4.6 percent from this year's high in April on concern
that U.S. unemployment and widening budget deficits in Europe
will derail global growth.
Government Jobs
The U.S. lost more jobs than forecast in September,
reflecting a decline in government payrolls that shows the
damage being done by rising fiscal deficits. Employers cut
staffing by 95,000 workers after a revised 57,000 decrease in
August, Labor Department figures showed. The median estimate of
economists surveyed by Bloomberg News called for a 5,000 drop.
The unemployment rate held at 9.6 percent.
Private payrolls that exclude government agencies climbed
64,000, less than forecast, underscoring the concern expressed
by some Federal Reserve policy makers that the rebound from the
worst recession since the 1930s has been too slow and may
require easier monetary policy. Unemployment forecast to average
at least 9 percent through 2011 may restrain consumer spending,
the biggest part of the economy.
14 Consecutive Months
The jobless rate has equaled or exceeded 9.5 percent for
14 consecutive months, surpassing the 13-month period from mid
1982 to mid 1983 as the longest span of elevated joblessness
since monthly records began in 1948.
"This data supports the prevailing idea that quantitative
easing is coming by the Fed," said Linda Bakhshian, who manages
equity-income funds at Federated Investors Inc. in Pittsburgh.
"By doing quantitative easing, it effectively reduces interest
rates, which reduces the capital costs to businesses."
Federated manages $337 billion.
Investors are disposed to buy stocks before the Nov. 2
congressional election because Republicans are likely to win a
majority of the House and push for less government intervention
in markets, said Ralph Shive, the South Bend, Indiana-based
manager of the $1.6 billion Wasatch-1st Source Income Equity
Fund.
'The Economy Stinks'
"Yes, the economy stinks," Shive said. "Real demand is
going to be very difficult as we work out from this debt
overhang. But there is some optimism building, and maybe it has
something to do with this rally, about some better policies in
Washington that might help business get going again."
A gauge of raw-materials producers rose 1.9 percent, the
biggest gain in the S&P 500 within 10 industries. Commodities
prices rose as the dollar fell on speculation the Fed will
debase the currency by stepping up purchases of government debt.
Alcoa advanced 6.6 percent to $13. The largest U.S.
aluminum producer reported third-quarter earnings excluding
certain items of 9 cents a share, topping the 5-cent average
estimate of analysts surveyed by Bloomberg.
CF jumped 9.4 percent to $107.90, Agrium Inc. climbed 6.4
percent to $80.19 and Mosaic Co. advanced 7.6 percent to $66.21.
Corn, soybean and wheat prices surged by the maximum
permitted on the Chicago Board of Trade after the U.S.
Department of Agriculture reduced its estimates of supply.
Tyson Foods, the largest U.S. chicken processor, fell 7
percent to $15.14 on concern costs for corn will rise.
J.C. Penney
J.C. Penney Co. gained 5.3 percent to $33.32. Pershing
Square Capital Management LP, the New York hedge-fund firm led
by William Ackman, disclosed a 16.5 percent stake in the
company, making it the retailer's largest investor. Pershing
plans to engage in talks with J.C. Penney's board and managers
regarding the company's performance, according to the filing.
Fortune Brands Inc. climbed the most in a decade in New
York trading, rising as much as 14 percent to $59.40, as CNBC
reported that Pershing Square took an 11 percent stake in the
company.
Adobe lost 5.2 percent to $27.21. Speculation that the
maker of graphic software may be acquired by Microsoft Corp. is
"nonsense," the Wall Street Journal reported, citing
unidentified people at both companies.
Motorola Inc. slumped 2.7 percent to $8.36. The
communications-equipment maker was cut to "hold" from "buy"
at Citigroup Inc.
Steve Leuthold, whose Leuthold Core Investment Fund has
beaten 85 percent of its competitors in the past five years,
said he boosted his stock holdings and may invest as much as 70
percent in equities because the market is poised to reach a new
2010 high.
'Pretty Healthy'
"The market looks pretty healthy," Minneapolis-based
Leuthold, 72, said in a telephone interview yesterday. "It's
becoming clear that the economy is in a recovery mode. We look
at the valuations and the technical side. I wouldn't be
surprised to see the market move to new highs maybe as soon as
the end of November."
Nasdaq OMX Group Inc. is introducing the 12th U.S. stock
exchange today, with rules designed to attract larger orders
from mutual funds and other investors. The exchange, called
Nasdaq OMX PSX, will enable some investors to trade more shares
at once and others to receive executions they may not have
otherwise gotten.
"It's new, it's unique, it's innovative, and it's de-
emphasizing speed and focusing on displayed liquidity," Brian
Hyndman, senior vice president in transaction services at Nasdaq
OMX, said Sept. 22. The company operates two other equities
exchanges: Nasdaq Stock Market and Nasdaq OMX BX.
For Related News and Information:
Developed Markets View: DMMV <GO>
World stock indexes: WEI <GO>
Most-active U.S. stocks: MOST US <GO>
U.S. stock market map: IMAP US <GO>
Top stories on stocks: TOP STK <GO>
Stories on U.S. stocks: NI USS <GO>
Feature stories: TNI USS FEA <GO>
Equity screening: EQS <GO>
Graphing: GRAPH <GO>
Equity derivatives: EDRV <GO>
Stories on U.S. stock options: NI USO <GO>
--With assistance from Nikolaj Gammeltoft, Nina Mehta and Lu
Wang in New York. Editors: Nick Baker, Michael P. Regan
To contact the reporter on this story:
Rita Nazareth in New York at +1-212-617-8908 or
rnazareth@bloomberg.net.
To contact the editor responsible for this story:
Nick Baker at +1-212-617-5919 or nbaker7@bloomberg.net.
