Stocks, Dollar Rally as Gold, Treasuries Drop on Jobs Data
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By Mary Childs
Dec. 4 (Bloomberg) -- Stocks rallied, while Treasuries slid and gold was poised for the biggest decline since July, as an unexpected decrease in the U.S. unemployment rate bolstered optimism that the world’s largest economy is strengthening. The U.S. Dollar Index gained the most in 10 weeks.
The Standard & Poor’s 500 Index jumped 1.4 percent to a 14- month closing-basis high of 1,115.81 at 10:49 a.m. in New York after the Labor Department said the U.S. lost the fewest jobs last month since the recession began. The MSCI Emerging Markets Index rose for a fifth straight day, its longest streak in almost a month.
Two-year Treasuries fell the most since August, sending yields up 11 basis points to 0.83 percent. Gold futures for February delivery slid 2.1 percent to $1,192.40 an ounce as the Dollar Index, which gauges the currency against six major counterparts, rallied more than 1 percent.
“We’re going to be popping bubblies,” said Burt White, chief investment officer at LPL Financial in Boston, which oversees $269 billion. “It’s great news and this has a huge impact on consumption and consumer spending and all the other aspects that can really continue to fuel growth here.”
The S&P 500 extended its weekly gain to 2.1 percent after the Labor Department said the nation lost 11,000 jobs in November, compared with the median economist estimate for a decrease of 125,000. The unemployment rate fell to 10 percent, signaling the recovery is lifting the labor market from the worst slump since World War II.
U.S. stocks fell yesterday as concern grew that job losses would top economists’ estimates. A private report on payrolls suggested the unemployment rate “might tick upward,” White House press secretary Robert Gibbs said yesterday.
‘Enjoy It for Today’
“Bottom line, the data is a clear positive but doesn’t square with other info,” said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, in a note to clients. “But let’s enjoy it for today.”
Gold futures for February delivery fell for the first time this week, heading for the biggest drop for a most-active contract since July 8.
The dollar rose against 12 of the 16 most-traded currencies. It strengthened 1.7 percent versus the yen for a fourth day of gains, the longest stretch since October. The Dollar Index jumped 1 percent to 75.389.
The Canadian dollar rose against all of its major counterparts except the Mexican peso as the nation’s employers added more positions than expected. The yen was headed for its first weekly decline versus the dollar since October.
Fed Rate Bets
The dollar rallied as the jobs report spurred traders to increase bets that the Federal Reserve next year will boost its benchmark interest rate from a record low range near zero. Odds of an increase by the Fed’s June meeting grew to 55 percent from 43 percent yesterday, according to Fed funds futures trading.
Treasuries slid as the jobs report reduced demand for the relative safety of government debt. The 10-year yield jumped 11 basis points, or 0.11 percentage point, to 3.5 percent
The cost to protect against defaults on U.S. corporate bonds fell. The Markit CDX North America Investment-Grade Index declined 2.5 basis points to 99 basis points as of 8:39 a.m. in New York, according to broker Phoenix Partners Group. A decrease in the index signals improvement in investor confidence.
Asian markets closed before the U.S. jobs report. The MSCI Asia Pacific Index slipped from a 15-month high as yesterday’s unexpected contraction in U.S. service industries sparked concern about the strength of the global economic recovery.
Japan’s Topix index added 0.2 percent today to cap a 9.7 percent advance over the past five days, its best week since August 1992. The rally came as the yen weakened on speculation the Bank of Japan would take measures to limit the currency’s appreciation. The central bank announced a 10 trillion-yen ($113 billion) credit program on Dec. 1 amid government calls for it to combat falling prices.
To contact the reporter on this story: Mary Childs in New York at mchilds4@bloomberg.net.
Last Updated: December 4, 2009 10:52 EST
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