Stocks finish up after unruly jobs report reaction

Stocks finish up after unruly jobs report reaction, Stocks rose Friday following a stronger-than-expected June employment report that sparked a rout in gold and bonds. The yield of the bellwether 10-year Treasury note jumped to 2.72%, a two-year high, from 2.5%. And the price of gold sank 2.5% to $1,221.10 an ounce.

The price of crude oil rocketed -- partly on fears of intensifying political turmoil in Egypt but also because investors think the Federal Reserve is getting more evidence that it needs to reduce its massive monthly bond purchases as soon as September. In afternoon trading, the price of oil was above $103 a barrel, up 2% for the day and the highest price in 2013.

The Labor Department said 195,000 new jobs were added to nonfarm payrolls in June while the unemployment rate stayed at 7.6%. Investors fear the better-than-expected job gains, including sharp upward revisions in May and April, will spur the Fed to pull back on its massive stimulus program on the early side of the range it has set out for tapering purchases of Treasury and mortgage-backed securities.

The Dow Jones industrial average finished up 1%, rising 147.29 points to close at 15,135.84. The broader Standard & Poor's 500 index rose 1%, up 16.48 points to end at 1,631.89.

The Nasdaq composite index also rose 1% on strong gains in shares of online game maker Zynga, daily deals service Groupon, Sony and Nokia. It finished up 35.71 points to finish at 3,479.38.

Markets had been closed Thursday in observance of the July Fourth holiday.

The strengthening jobs picture will be enough for the Fed to begin "tapering" its bond purchases in September, or what Michael Gapen, an economist at Barclays, calls "Septaper."

Gapen expects the Fed to cut back on its purchases of mortgage-backed bonds and 10-year Treasuries to $70 billion per month from its current $85 billion. He also expects the jobless rate to drop to 7% in the first quarter of 2014 and a full end to its bond buying -- quantitative easing dubbed "QE."

The stock market will continue to undergo a transition – sometimes rocky -- from a period characterized by a very accommodative Fed to one in which the central bank will be less supportive over time, says Quincy Krosby, a stock strategist at Prudential Financial.

For stocks to continue rising, investors will be watching closely to see if the economy can shrug off less stimulus and rising interest rates, she adds.

"If you are going to have tapering, on the other side of the equation you better see economic growth gain traction," says Krosby. But any "transition" related to Fed policy shifts is always turbulent, she warns, which could explain the fact that stocks gave back their earlier gains Friday.

"You have to reset the prism at which you look at the market. And that prism has to begin to factor in a little less liquidity," Krosby says. "Markets love liquidity and they have never loved a change in policy. But, unfortunately, all good things have to come to an end."

However, Todd Schoenberger, managing partner at LandColt Capital, says the June employment report is bullish for stocks, he says.

For investors, the key data point in Friday's report was the unchanged jobless rate because the Fed has stressed that it wants to see the jobless rate fall before it begins paring back -- and eventually ending -- its market-friendly bond-buying program.

In late June, Fed Chief Ben Bernanke clarified the central bank's policy stance, says it planned to start reducing its $85 billion in monthly bond purchases later this year and phase it out entirely in mid-2014 if the jobless rate falls to 7%, as expected.

The Fed's QE program was designed to stimulate the economy by keeping borrowing costs low and has been oft-cited as a key driver of rising stock prices.

From Schoenberger's perspective, the combination of strong jobs gains coupled with a still-elevated unemployment rate is a win-win for stocks as it suggests the economy is picking up steam but that the pace of job growth is still strong enough for the Fed to expedite its stimulus pull back.

"We can expect the Fed to continue providing hints of tapering, while maintaining status quo with the current QE program," says Schoenberger.

After Wednesday's abbreviated trading session, the Dow closed up 0.4% at 14,988.55 while the Nasdaq ended up 0.3% at 3,443.67. The S&P 500 closed up under 0.1% at 1,615.41. Earlier in the week, Wall Street rallied after ADP, a payrolls processor, said that businesses added more jobs last month than analysts had expected.

In Europe Friday, Britain's FTSE 100 index closed down 46.15 points, 0.7%, at 6,375.52, while Germany's DAX 30 index finished down 188.31 points, 2.4%, at 7,806 and France's CAC 40 index ended down 55.46 points, 1.5%, to 3,753.85 after the U.S. jobs report was released at 8:30 am. ET.

In Asia on Friday, Tokyo's Nikkei 225 ended up 291.04 points, 2.1%, to close at 14,309.97, and Hong Kong's Hang Seng added 386 points, 1.9%, to finish at 20,854.67.

The overall Asian gains followed a strong rally in Europe Thursday that was sparked by a statement from the European Central Bank that interest rates would remain at a record low "for an extended period of time" as well as an announcement from the Bank of England that speculation it would raise rates was unwarranted.

Stocks finish up after unruly jobs report reaction 2013-07-06T00:59:00-07:00 Rating: 4.5 Diposkan Oleh: My Videos Tube