Strong job gains send US stock market sharply higher
New York — The stock market surged to its biggest gain since early September Friday after another strong month of hiring by U.S. employers.
The solid news on the economy opened the way for the Federal Reserve to begin raising interest rates back toward normal levels later this month. Energy stocks and the price of crude oil fell after OPEC said it won’t cut production.
Stocks started the day higher after the Labor Department said employers added 211,000 jobs in November. That was more than investors expected, and a sign that consumers are still spending and keeping the economy afloat even as manufacturing and energy companies are struggling.
The rally gained more power after European Central Bank President Mario Draghi said the ECB is ready to expand its stimulus program if necessary. That was a relief: stocks and bonds tumbled Thursday after the ECB announced some new stimulus measures, but didn’t do as much as investors expected.
“His clarification of comments he made earlier in the week gives investors confidence that ECB will continue its ‘whatever is necessary’ course,” said Erik Davidson, chief investment officer at Wells Fargo Private Bank.
The Dow Jones industrial average rose 369.96 points, or 2.1 percent, to 17,847.63. The Standard & Poor’s 500 index had its best day since Sept. 8, rising 42.07 points, or 2.1 percent, to 2,091.69. The Nasdaq composite increased 104.74 points, or 2.1 percent, to 5,142.27 points.
When the Federal Reserve decided not to raise interest rates in September, investors gradually concluded that the Fed would act in December unless it received some big warning signs about the health of the economy.
Those signs never came. The September jobs report was disappointing, but hiring climbed in October, and November hiring was solid. The government also said the economy gained more jobs in September and October than it initially reported.
The Fed slashed its key short-term interest rate to near zero during the financial crisis and it kept it low throughout the Great Recession to encourage lending and hiring. It hasn’t raised interest rates in nine years.
Davidson said the jobs data was as good as investors expected, which gives them more confidence in the state of the economy and the Fed’s plans.
“The markets love predictability and this is about as predictable as you can get,” he said. In addition to the jobs growth, Davidson said more people are looking for work and wages are improving.
Luke Bartholomew, investment manager Aberdeen Capital Management, said it was almost a foregone conclusion that the Fed will raise interest rates, but what isn’t clear is what will happen after that.
“It would have taken a really catastrophically bad number to put the Fed off today,” he said. “It’s a question of what the path looks like next year.”
Consumer discretionary stocks were the best performers in the S&P 500. Discount retailer Dollar Tree, toy maker Mattel and homebuilder D.R. Horton climbed, and Apple rose $3.83, or 3.3 percent, to $119.03, a large move for the world’s most valuable company.
Energy stocks, however, took a beating, and almost all of the largest losses in the S&P 500 went to energy companies. Oil cartel OPEC said it won’t cut oil production even though global stockpiles keep growing. The price of oil is trading near six-year lows.
The price of U.S. crude fell $1.11, or 2.7 percent, to $39.97 a barrel in New York. Brent crude, a benchmark for international oils, slid 84 cents, or 1.9 percent, to $43.
Meanwhile warm weather in the U.S. is hurting demand for heating fuels like natural gas and heating oil. Natural gas drillers, pipeline companies and oil and gas service companies were all pummeled.
Stephen Schork, an independent analyst and trader, said that’s because weather throughout much of the U.S. remains warm, meaning Americans aren’t using as much energy to heat their homes.
“The market is giving up on winter,” he said. “Here in the East… there’s just no demand.”
Murphy Oil lost 85 cents, or 3.2 percent, to $25.46. Helmerich & Payne fell 2.23, or 4 percent, to $53.38. Southwestern Energy shed 45 cents, or 5.5 percent, to $7.74. Chesapeake Energy declined 32 cents, or 6.6 percent, to $4.55.
In other trading of energy futures, wholesale gasoline fell 2.6 cents, or 2 percent, to $1.27 a gallon. Heating oil declined 1.6 cents to $1.342 a gallon. Natural gas inched up 0.5 cents to $2.816 per 1,000 cubic feet.
The dollar regained some strength against the euro. The euro slipped to $1.0871 from $1.0975, and the dollar rose to 123.22 yen from 122.31 yen Thursday. Bond prices also bounced back, and the yield on the 10-year Treasury note fell to 2.27 percent from 2.32 percent.
Avon Products rose as multiple media reports said the beauty products company is considering selling its North American business to private equity firm Cerberus Capital Management. Avon jumped 23 cents, or 5.8 percent, to $4.22.
Gold gained $22.90, or 2.2 percent, to $1,084.10. Silver added 45 cents, or 3.2 percent, to $14.53 an ounce. Copper inched up 1.8 cents to $2.079 a pound.