Jobs report boosts US stocks

on 04/01/2013 22:07:35

The Standard & Poor's 500 closed at its highest level in five years today after a report showed that hiring held up in December, giving stocks an early lift.

The S&P 500 finished up 7.10 points at 1,466.47, its highest close since December 2007.

The index began its descent from a record close of 1,565.15 in October 2007, as the early signs of the financial crisis began to emerge. The index bottomed out in March 2009 at 676.53 before staging a recovery that has seen it more than double in value and move to within 99 points of its all-time peak.

The Dow Jones industrial average finished 43.85 points, or 0.3%, higher at 13,435.21. It gained 3.8% for the week, its biggest weekly advance since June. The Nasdaq closed up 1.09 point at 3,101.66.

Stocks have surged this week after lawmakers passed a bill to avoid a combination of government spending cuts and tax increases that have come to be known as the "fiscal cliff." The law passed late on Tuesday night averted that outcome, which could have pushed the economy back into recession.

The Labour Department said US employers added 155,000 jobs in December, showing that hiring held up during the tense fiscal negotiations in Washington. It also said hiring was stronger in November than first thought. The unemployment rate held steady at 7.8%.

The jobs report failed to give stocks more of a boost because the number of jobs was exactly in line with analysts' forecasts, said JJ Kinahan, chief derivatives trader for TD Ameritrade.

"The jobs report couldn't have been more in line," Mr Kinahan said. "The market had more to lose than to gain from it."

Among stocks making big moves, Eli Lilly and Co jumped 1.84 dollars, or 3.7%, to 51.56 after saying that its earnings will grow more than Wall Street expects, even though the drugmaker will lose US patent protection for two more product types this year.

Walgreen Co, the largest US drug store chain, fell 61 cents, or 1.6%, to 37.18 after the company said that a measure of revenue fell more than analysts had expected in December, even as prescription counts continued to recover.

Stocks may also be benefiting as investors adjust their portfolios to favour stocks over bonds, said TD Ameritrade's Kinahan. A multi-year rally in bonds has pushed up prices for the securities and reduced the yield that they offer, in many cases to levels below company dividends.

Goldman Sachs reaffirmed its view that stocks "can be an attractive source of income," and warned that there is a risk that bonds may fall. In a note to clients, the investment bank said that an index of AAA rated corporate bonds offers a yield of just 1.6%, less than the S&P 500's dividend yield of 2.2%.