Stocks edge higher after encouraging jobs reports

Yield on 10-year Treasury notes reaches 3 percent, the highest level since July 2011
Associated Press
Sep 6, 2013

More evidence of an improving job market helped lift stocks Thursday.

The pair of employment reports also boosted the yield on 10-year Treasury notes to 3 percent, the highest level since July 2011.

The Labor Department reported that the four-week average of applications for U.S. unemployment benefits has fallen in the past month to its lowest point since October 2007, two months before the Great Recession officially began.

Also, a survey from the payroll company ADP showed that American businesses added 176,000 jobs in August, fewer than in June and July but roughly in line with the monthly average for the year.

The encouraging news came one day before the government releases its closely watched report on job growth for August. Many investors believe that strong growth will ensure that the Federal Reserve will start to reduce, or "taper," its bond-buying program later this month.

The U.S. central bank is buying $85 billion in bonds a month to keep long-term interest rates low and to stimulate the economy. Fed stimulus has helped drive a bull market in stocks that has lasted more than four years.

Thursday's employment news means that "the Fed probably lays out a tapering schedule in September," said Phil Orlando, chief equity market strategist at Federated Investors.

While stock trading may be volatile in the coming weeks, investors will ultimately see the reduced stimulus as a positive sign because it means that the economy is strong enough to expand without the Fed's help, Orlando said. "It should leave stocks in great shape."

The Dow Jones industrial average rose 6.61 points, or less than 0.1 percent, to 14,937.48. The Standard & Poor's 500 index rose two points, or 0.1 percent, to 1,655.08. The Nasdaq composite gained 9.74 points, or 0.3 percent, to 3,658.78.

Some retail stocks were among the biggest gainers.

Costco rose $3.12, or 2.8 percent, to $114.62 after the discount store chain said revenue at stores open at least a year rose 4 percent in August, slightly faster than Wall Street's expectations. Walgreen's also gained after reporting a strong rise in sales last month. Walgreen's rose 70 cents, or 1.4 percent, to $50.19 after reporting a 4.8 percent increase in sales.

In government bond trading, the yield on the 10-year Treasury note climbed after the jobs reports. It also edged higher after a private survey showed that the U.S. service sector expanded at the fastest pace in nearly 8 years last month as sales and orders grew and employers ramped up hiring.

The yield on the 10-year note rose to 3 percent late Thursday from 2.90 a day earlier. The yield is the highest it's been in two years as bond traders anticipate that the Fed will cut back its stimulus. It has risen sharply from 1.63 percent in early May.

Rising yields on Treasury notes matter for the economy because they are used to set mortgage rates and other key interest rates. Average fixed rates on U.S. long-term mortgage rates rose to 4.57 percent this week, close to their highest of the year.

Stocks slumped in August, partly over concerns that the Fed would slow its stimulus and higher interest rates would harm the economy. The S&P 500 index fell 3.1 percent, its biggest monthly decline since May 2012.

It appears, however, that investors are getting more comfortable with higher borrowing costs.

"We don't anticipate that a gradual rise in rates will choke off the economy," said Dave Roda, regional chief investment officer for Wells Fargo Private Bank. "We are still looking at very low rates historically."

In commodities trading, the price of oil rose $1.14, or 1.1 percent, to $108.37 a barrel. Gold fell $17, or 1.2 percent, to $1,373 an ounce.

Among other stocks making big moves:

— Conn's, a consumer finance company, fell $7.95, or 12 percent, to $60.36 after the company reported second-quarter earnings that missed Wall Street expectations.

— Groupon rose 37 cents, or 3.5 percent, to $10.66 after Morgan Stanley raised its recommendation on the stock to "overweight" as the company tweaked its business model.

— Louisiana-Pacific, a building products company, rose $1.69, or 11 percent, to $16.95 after the company said late Wednesday that it is buying Ainsworth Lumber of Canada for $1.1 billion.

 

Comments

coasterfan

Cool, yet another month of improvement with the jobs report. Let's see, I think we're up to nearly 50 consecutive months of net job growth. Only the most severely fact-challenged are still trying to deny that things are way better in 2013 than they were in Dec. 2008, when America was
hemorrhaging hundreds of thousands of jobs each month.

Of course, conservative politicians have a vested interest behind their denial: if they admit that things are actually getting better, it makes it harder for them to get their people voted into office. So, they keep telling people things are getting worse, when it's quite obvious that things aren't getting worse.

Just imagine how much better things would be if the same people would just pass Obama's jobs bill, instead of advocating policies that keep job growth lower than it needs to be.

deertracker

Agreed! Here comes the HATERS!

Darwin's choice

Do you purchase chap-stick in 55 gallon barrels?

Contango

Re: "Cool,"

169K is pretty lousy. We'd need TWICE that many for a couple yrs. to get back to pre-recession levels.

Also, better check the downward job numbers revisions from previous months.

http://www.businessinsider.com/t...

Labor force participation rate is STILL lower than 30 yrs. ago:

Aug. 1983: 64.3

Aug. 2013: 63.2

http://data.bls.gov/timeseries/L...

Largely thank the Federal Reserve's ZIRP and QE policies for ANY improvement and NOT that economic dunderhead in the WH

KnuckleDragger

Yes, coasternut, in yet another unresearched rant about how wonderful Obama is, forgot to again look at the whole story. 7.3% unemployment rate, caused only because of a increase in people dropping out of the labor force. As a supposed college educated ex-teacher, he sure lacks the research skills necessary to critically analyze anything. Thank goodness he won't be educating my children.

arnmcrmn

coaster needs to get a refund from whatever college he/she attended.

Contango

Why did the unemployment rate decline?

More Americans are giving up.

"Record 90.5 Million Out Of Labor Force As Half A Million Drop Out In One Month; Labor Force Participation Rate Plunges To 1978 Levels":

http://www.zerohedge.com/news/20...

Pres. Obama is starting to make Jimmy Carter look like an exceptional POTUS.

The Hero Zone's picture
The Hero Zone

What is eighty five billion a month buying us? Especially given the status of things.

Contango

Re: "What is eighty five billion a month buying us?"

Helping to support the stock and housing mkts.

"God bless the child that's got his own." - Billie Holiday

http://www.youtube.com/watch?v=Z...

The Hero Zone's picture
The Hero Zone

Do we have a plan to ween off this? Are these markets going to "pay back" the money? I get the general reasoning but it just seems...disingenuous...somehow. I'm happy that the article at least mentions the infusions instead of just saying "everything's ok!" with no context. But then again anything can be successful or at least break even with that much money being pumped into it.

How can we ween off this and start being responsible?

Contango

Re: "How can we ween off this"

I'm with ya brother, however the "alternative" is equally ugly.

One of my mentors, von Mises wrote the following:

"The question is only whether one should continue expansionism until the final collapse of the whole monetary and credit system or whether one should stop at an earlier date. The sooner one stops, the less grievous are the damages inflicted and the losses suffered."

http://www.mises.org/daily/6081/

The Hero Zone's picture
The Hero Zone

Thank you, that was a great read! While I may sometimes disagree with them, I always hope that some of the more left-leaning commenters here would provide articles or explanations. I enjoy learning what others think and especially WHY; and even MORE especially if I go into it with a questioning mind. I can be convinced as many others can, but a case has to be built.

To that point I visited the President's re-election office twice and Romney's zero times. I figured that if people are willing to give their time, money, and effort supporting someone with which I generally disagree (my nose-holding for the Republican candidate aside) I need to find out why. It's obvious I'm inquisitive and while my Google-fu is strong, it isn't the same as being able to talk to someone about their thoughts or have a personal recommendation.

arnmcrmn

The left just cannot and will not accept this. They just like their savior Obie, conveniently like to forget about those who have dropped off the unemployment chart. Amazing these people can actually tout false information 24/7.

We are currently sitting at 13.7% unemployment.

arnmcrmn

Errrr.....might want to check that again SR. I just checked the market....its back down to 2.90. But go ahead with your forward liberal agenda with smoke and mirrors.

Darwin's choice

Coasterfan and Deertracker.....48 million on welfare, highest number in history, almost every one because of Obama, and you keep smooching! You two are pathetic!

BULLISDEEP's picture
BULLISDEEP
The Big Dog's back

You right wingnuts are so funny.

arnmcrmn

and you are clueless.

grumpy

Part time workers and folks dropping out of the workforce are exactly what the democrats are working for. At least that is what they celebrate each month when both of those numbers increase. Logic would say they are proud that people are going on welfare, dropping out of the workforce and only working part time.

That must be what they are shooting for. We see how they brag on the current economy, and what they have accomplished with being in control of the Presidency since 09, the Senate, since 07, and they had control of the House for obama's first two years... Till they passed policies and bills that had the voters deciding they didn't like dims in total control of the gov't... No more supermajority in the Senate and the dims lost the house, along with most of the state governments.

kURTje

Tata & AutoZone. Both have been steady performers. AutoZone is based in Ohio. Tata hopes to launch America's lowest priced vehicle, under 10K I believe. Buy stocks you believe in. (Tata also owns the patent for the Sigh Grove)

arnmcrmn

Mutual funds....you want long term growth...invest in healthcare.....

Contango

Re: "invest in healthcare....."

No more than 5-10% of the total portfolio.

Majority of investible assets should be in broad-based diversified no-load equity and fixed funds.

arnmcrmn

Im about 20% in mine but they are returning quite a bit each year so no reason to dump. Recently (a year ago) I got into some natural gas exploration and development.....doing well also.

Contango

Good luck.

I tend not to sector or performance chase, nor do I like to market time.

Many areas work well until they don't - see housing '07 or tech '00.

BULLISDEEP's picture
BULLISDEEP
kURTje

Forget health care/medical. Way too many greedy people involved. Always think independent - never follow the herd.