MARKET REPORT

Dow hits new high on jobs news

Trader Thomas Ferrigno (left), speaks Friday with trader Glenn Kessler on the floor of the New York Stock Exchange. Stocks rose as investors reacted to a stronger-than-expected October jobs report.
Trader Thomas Ferrigno (left), speaks Friday with trader Glenn Kessler on the floor of the New York Stock Exchange. Stocks rose as investors reacted to a stronger-than-expected October jobs report.

NEW YORK - An unexpectedly strong jobs report gave stocks a lift Friday, pushing the Dow Jones industrial average back to an all-time high.

The gains were led by banks, such as Bank of America and JPMorgan Chase, which stand to benefit from a pickup in lending as the economy strengthens. Consumer-focused stocks such as Priceline.com and Disney also rose after reporting higher profits, and Gap soared after raising its earnings forecast.

Losers included housing stocks and Twitter, which dropped 7 percent the day after its initial public offering.

The Dow gained 167.80 points, or 1.1 percent, to 15,761.78. The Dow also closed at a record high Wednesday.

The Standard & Poor’s 500 index ended 23.46 higher, or 1.3 percent, at 1,770.61, just a point below its record. The Nasdaq composite rose 61.90 points, or 1.6 percent, to 3,919.23.

The jobs survey left investors grappling with how to interpret this week’s surprisingly strong economic data and what it means for the Federal Reserve’s economic stimulus program.

On Thursday, the government reported that U.S. economic growth accelerated in the third quarter. The Fed’s stimulus has helped power this year’s stock rally.

“We’re walking a tight wire with the Fed,” said Rob Lutts, chief investment officer at Cabot Money Management. Lutts said the job survey was positive because it showed the economy was improving, but perhaps not strongly enough to assure that Fed policymakers will pull back on its bond-buying program before the end of year.

Both the Dow and the S&P 500 recovered all of their losses from Thursday, when concern about the Fed withdrawing its stimulus outweighed optimism about faster economic growth.

The reaction to the jobs report was even more pronounced in the bond market.

The yield on the 10-year Treasury note jumped to the highest in six weeks as investors sold bonds, anticipating less demand for them if the Fed slows its purchases.

Rising interest rates are a sign that investors are more confident in the economy. They are a boon to banks because it means that they can lend money at higher rates.

The yield on the 10-year note jumped to 2.75 percent from 2.60 percent on Thursday, the highest level since Sept. 20.

JPMorgan Chase shares rose $2.31, or 4.5 percent, to $53.96. Bank of America gained 52 cents, or 3.8 percent, to $14.32.

Housing stocks were among the biggest decliners Friday.

Higher Treasury yields lead to higher mortgage rates, and that in turn can hurt demand for homes. Lennar fell $1.45, or 4.2 percent, to $32.79. Pulte Group dropped 66 cents, or 3.8 percent, to $16.85.

The government reported that U.S. employers added 204,000 jobs in October, an unexpected burst of hiring during a month in which the federal government was partially shut down for 16 days.

The job additions were far greater than the 130,000 economists were expecting, according to FactSet, a financial data provider.

The jobs report was the second piece of unexpectedly robust economic news that Wall Street received in the past two days.

The Commerce Department said Thursday that the U.S. economy grew at a 2.8 percent annualized rate in the third quarter, better than the 2.5 percent rate economists were looking for.

The Fed has been buying $85 billion worth of bonds each month since last December to keep long-term interest rates low and encourage hiring and borrowing.

The program has also helped drive up stock prices by making bonds look expensive by comparison.

Business, Pages 34 on 11/09/2013

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