The Rising Influence of Rising Affluence

[DewDiligence]

Stocks Close at Multiyear High

[The story in #msg-79323462 was a major driver for today’s move, IMO.]

http://online.wsj.com/article/SB10000872396390444273704577637024081962272.html

›September 7, 2012, 5:32 p.m. ET
By MATT JARZEMSKY

Stocks edged up, adding to multiyear highs, as disappointing August jobs growth stoked speculation the Federal Reserve will unveil further measures to juice the U.S. economy.

The Dow Jones Industrial Average added 14.64 points, or 0.1%, to 13306.64, its highest finish since December 2007. The Standard & Poor's 500-stock index gained 5.80 points, or 0.4%, to 1437.92, its highest close since January 2008. [Including reinvested dividends, the S&P 500 is way ahead of its Jan 2008 level, of course.] Materials shares led the advance on Friday [e.g. CLF was +14% and VALE +7%], with coal miner Alpha Natural Resources jumping 99 cents, or 17%, to $6.90, after China approved infrastructure spending to support its economy [#msg-79323462]. The Nasdaq Composite Index ticked up 0.61 point, or less than 0.1%, to 3136.42, building on a rally that has seen it surpass a high hit nearly 12 years ago.

For the week, the Dow rose 1.6%, the most since late July, and the S&P 500 had its steepest increase, 2.2%, since early June, thanks to a rally Thursday after European Central Bank President Mario Draghi detailed a bond-buying program aimed at cutting the borrowing rates of the euro zone's most debt-strapped countries.

"The path of least resistance is higher, not lower," said Mark Lehmann, president at JMP Securities. "Despite all the bad news and all the fear and all the problems and blowups, the market is making new highs. That's telling you that people are underexposed to equities, that you do have underparticipation, but there is a recovery going on."

The U.S. economy added 96,000 jobs in August, the Labor Department reported, short of economists' expectation for 125,000 jobs. The unemployment rate, obtained in a separate survey, fell to 8.1% from 8.3% a month earlier, bucking economists' predictions for it to remain unchanged.

"It's not bad enough to have immediate QE3, but it's not good enough to take additional stimulus off the table," said Dean Junkans, chief investment officer of Wells Fargo Private Bank, referring to "quantitative easing," or asset purchases by the Federal Reserve meant to support the economy.

Mr. Junkans said the drop in unemployment offered little comfort because it reflected the fact that Americans are leaving the labor pool. The labor force participation rate fell to 63.5% in August from 63.7% a month earlier, the department reported, the lowest since 1981.

Small-capitalization stocks outperformed Friday, with the Russell 2000 index adding 0.5%. Sectors seen as tied to global growth, such as energy and financials, also outpaced the broader market.

"With a weaker-than-expected payroll number, investors are really positioning themselves for QE," said Steven DeSanctis, small-cap strategist at Bank of America Merrill Lynch "They're looking for outperformance by the riskier assets."

European markets were broadly higher, with the Stoxx Europe 600 up 0.2%. The index reached a 14-month high in intraday trading before pulling back.

Asian markets surged, with China's Shanghai Composite running up 3.7% after Beijing's approval of infrastructure projects. Japan's Nikkei Stock Average climbed 2.2%.

Crude-oil prices rose 0.9%, to settle at $96.42 a barrel, while gold prices added 2%, to finish at $1,737.50 a troy ounce. The dollar fell against the euro and yen. The yield on the 10-year Treasury note fell to 1.662%.

In corporate news, Kraft Foods fell 2.32, or 5.5%, to 39.99, weighing on the Dow, after giving outlooks for the two companies into which it plans to split its business. [I think KFT’s split-up is dumb, FWIW.]

Etc.‹