Stocks rally on jobs data, ECB bond plan
NEW YORK (CNNMoney) – A rally on Wall Street gained momentum Thursday as investors welcomed better-than-expected reports on the U.S. labor market and the European Central Bank’s bond-buying plan.
The Dow Jones industrial average surged more than 200 points, or 1.8%. The S&P 500 and Nasdaq shot up more than 1.7%.
The advance was broad, with all 30 components of the Dow moving higher. Bank stocks were leading the gains on the blue chip index with shares of Bank of America and JPMorgan Chase soaring more than 4%. About 97% of the S&P 500 was trading in positive territory.
Speaking after a meeting of top ECB officials in Frankfurt, the central bank’s president, Mario Draghi, reiterated his pledge to do “whatever it takes” to preserve the euro and said the ECB is prepared to make “outright monetary transactions,” or OMTs, in the secondary market for euro area government bonds.
The move is aimed at Spain and Italy, which struggled with unsustainable borrowing costs earlier this year, but will be available to all euro nations.
“The news out of Europe is boosting the market,” said Jack Ablin, chief investment officer at Harris Private Bank. “It seems like investors were skeptical of the ECB being able to pull of unlimited bond buying authority, so that’s really helping.”
The ECB also left interest rates unchanged at 0.75% and lowered its outlook for economic growth in 2012. The central bank now expects the euro area economy to contract between 0.2% and 0.6% this year.
On the domestic front, a handful of reports on unemployment and hiring showed an improvement in the job market. Jobless claims fell by more the economists had forecast in the latest week, while companies expanded their payrolls more than expected in July.
Investors hope Thursday’s data is a preview of what the U.S. employment picture looks like ahead of Friday’s monthly jobs report.
“We’ve been seeing incremental improvement in the U.S. economy, and it would be great to get two strong jobs numbers in a row,” said Ablin.
The government is expected to report Friday that employers added 120,000 jobs in August, according to economists surveyed by CNNMoney. Investors will be paying especially close attention to Friday ‘s jobs report, since it will likely influence the Federal Reserve’s decision on whether it will announce more quantitative easing at the conclusion of its next meeting on Sept. 12-13.
World Markets: Britain’s FTSE 100 added 1.4%, the DAX in Germany rose 2.2% and France’s CAC 40 gained 2.3%.
Second-quarter growth in the euro area decreased by 0.2% compared with the previous quarter, according to second estimates released by Eurostat on Thursday. GDP for the eurozone was 0.5% lower than the same quarter last year.
Asian markets closed higher Thursday. The Shanghai Composite edged up 0.7% and the Hang Seng in Hong Kong added 0.3%, while Japan’s Nikkei ended slightly above breakeven.
Economy: Employment in the U.S. nonfarm private business sector increased by 201,000 from July to August, according to ADP’s National Employment Report. The estimated gain from June to July was revised up, from the initial estimate of 163,000 to a revised estimate of 173,000.
The numbers blew past expectations, as economists surveyed by Briefing.com had forecast an increase of 143,000 jobs.
Another upbeat report showed that jobless claims decreased to 365,000 during the week ending in September 1st , down 12,000 from the previous week’s revised 377,000 figure, according to the Labor Department. This is less than the 373,000 claims that were expected by economists surveyed by Briefing.com.
These jobs numbers follow a report from outplacement firm Challenger, Gray & Christmas, which showed more than 32,000 planned job cuts in August — fewer layoffs than were announced in July.
The Institute for Supply Management said its index of activity in the service sector increased to 53.7 in August from 52.6 in July. The index was expected to come in at 52.4, according to a survey of analysts by Briefing.com.
Companies: Amazon is expected to unveil a new Kindle line Thursday afternoon. Last week the company reported that its Kindle Fire had sold out.
Shares of Walgreen were lower after the company reported disappointing August sales.
Corporate results are due after the bell Thursday from apparel company Quiksilver and gunmaker Smith & Wesson.
Currencies and commodities: The dollar edged higher against the euro and the Japanese yen, but was flat versus the British pound.
Oil for October delivery rose $1.64 to $97.00 a barrel.
Gold futures for December delivery gained $16.20 to $1,7707.80 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 1.66% from 1.59% late Wednesday.