Wall St withstands jobs disappointment

NEW YORK—US stocks held steady at four-year highs on Friday, closing out their best week since June as a sharply-disappointing jobs report only fuelled expectations that the Federal Reserve would act to stimulate the economy next week. The S&P closed higher, but strength in both the Dow and Nasdaq was limited by blue-chips Intel and Kraft, both of which warned on their profit outlooks.

The August nonfarm payrolls report showed job growth of only 96,000, well under the 125,000 expected. That added to hopes the Federal Reserve will announce additional stimulus after its policy meeting ends Thursday, but investors could be in a holding pattern until then.

“There’s no way to sugarcoat how disappointing the jobs number was, and as it reinforces the view the economy is lagging, that puts more pressure on the Fed to act,” said Joseph Tanious, global market strategist at JP Morgan Funds in New York. “I absolutely think stocks still have room to grow from here, but there will certainly be disappointment if we don’t get direction from the Fed next week.”

The expectations for central bank intervention, both from the Fed and the European Central Bank, has fueled a rally that took the S&P 500 to its highest level since January 2008 on Thursday and pushed the Nasdaq to a 12-year high. The gains were fueled by the ECB’s decision to launch a potentially unlimited bond-buying programme to lower struggling euro zone countries’ borrowing costs.

This was a very bold and unorthodox move by the ECB, and it appears to be more important for stocks than the payroll report, another example of how Europe is impacting the US with a vengeance,” said Marco Priani, vice president at Advisory Research in Chicago, which has about US$10 billion in assets.

Energy and financial shares were among the day’s strongest, lifted as investors bought shares in areas tied to the pace of economic growth. ConocoPhillips rose 1.5 per cent to US$56.64 while Noble Energy rose 2.4 per cent to US$91.50. Bank of America surged 5.4 per cent to US$8.80. The Dow Jones industrial average ended up 14.64 points, or 0.11 per cent, at 13,306.64. The Standard & Poor’s 500 Index was up 5.80 points, or 0.40 per cent, at 1,437.92.

The Nasdaq Composite Index was up 0.61 points, or 0.02 per cent, at 3,136.42. For the week, the S&P is up 2.2 per cent while the Dow is up 1.6 per cent and the Nasdaq is up 2.3 per cent. It was the best week for the S&P and Nasdaq since June, and the best for the Dow since July. Intel Corporation cut its third-quarter revenue estimate and withdrew its full-year forecast, saying demand for its chips declined as customers reduced inventory and businesses bought fewer personal computers.

Shares of the world’s largest chipmaker fell 3.6 per cent to $24.19 while the PHLX semiconductor index lost 0.8 per cent. Kraft Foods Inc gave earnings forecasts for the two companies it will split into next month that disappointed analysts. The stock, which like Intel is a Dow component, fell 5.5 per cent to US$39.99. The jobs report showed the unemployment rate dropped to 8.1 per cent from 8.3 per cent in July, but it was largely due to Americans giving up the search for work.

Material shares were also among the strongest of the day after China approved US$157 billion in infrastructure spending in a move to energise an economy that has recently shown signs of slowing. AK Steel Holding surged 7.6 per cent to US$5.78 while James River Coal added 5.3 per cent to US$2.76 and Alpha Natural Resources soared 17 per cent to US$6.90.

Reuters