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U.S. stocks rise as Dow average tops record amid payrolls report

By Jonathan Morgan and Joseph Ciolli
Bloomberg Nhews

U.S. stocks rose, with the Dow Jones Industrial Average erasing its loss for the year, as data showing companies added to payrolls last month fueled optimism the economy withstood severe winter weather.

The Standard & Poor’s 500 Index rose 0.1 percent to a record 1,887.12 at 3:35 p.m. in New York, for a fourth day of gains. The Dow average rose 44.41 points, or 0.3 percent, to 16,577.02, an all-time high on a closing basis. Trading in S&P 500 stocks was 8.9 percent below the 30-day average at this time of day.

“The positive tone from yesterday is most likely to continue into the jobs report, absent some big macro piece of data that comes out between now and then,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “Longer-term investors are still of the opinion that the U.S. equity market remains one of the best places to be invested for this year.”

The S&P 500 rose 0.7 percent yesterday to cap a third day of gains, the longest streak since February, as consumer and technology stocks pushed the gauge to a record and an index of manufacturing boosted optimism the economy withstood severe winter weather.

Equity Valuation

The equities benchmark trades at 17.5 times reported earnings, the highest level since 2010 and 11 percent above its five-year average, according to data compiled by Bloomberg.

Data today showed February factory goods orders rose 1.6 percent, topping an estimated advance of 1.2 percent. A separate report indicated companies in the U.S. boosted payrolls by 191,000 in March, according to figures from the ADP Research Institute in Roseland, New Jersey. The median forecast of 38 economists surveyed by Bloomberg called for a 195,000 advance.

The government’s monthly jobs numbers for March are due April 4.

Reports from hiring to factory output had shown weakness this year as freezing temperatures and mountains of snow kept shoppers indoors, grounded flights and made it harder for shippers to fill product orders.

Fed Chair Janet Yellen said last week that “considerable slack” in the labor market is evidence that the central bank’s unprecedented accommodation will be needed for “some time” to put Americans back to work.

Fed Comments

Investors also watched comments from Fed officials today to gauge the timing and pace of further cuts to stimulus.

Fed Bank of St. Louis President James Bullard said in a Bloomberg Radio interview that a further slowing of inflation could prompt policy makers to suspend tapering of bond purchases, though he doesn’t expect that to happen.

Fed policy should remain accommodative “for quite some time” given “considerable amount” of economic slack that remains, Atlanta Fed President Dennis Lockhart said in a speech in Miami.

The central bank has cut $10 billion from its monthly bond buying in each of its past three meetings, leaving the total at $55 billion.

The Fed stimulus has helped propel the S&P 500 higher by as much as 180 percent from its bear-market low in March 2009. The equity gauge climbed 1.3 percent in the first three months of 2014, its fifth consecutive quarterly advance.

Sweet Spot

“Growth appears not too strong to feed the Fed’s hawks but neither too slow to question the recovery, re-emphasizing the sweet-spot concept -- which should be the most favorable environment for risky assets in 2014,” Witold Bahrke, who helps oversee $55 billion as a senior strategist at PFA Asset Management in Copenhagen, wrote in an e-mail.

Investors have removed $3.7 billion from U.S. equity exchange-traded funds in the past five days and added $1.3 billion to bond ETFs, data compiled by Bloomberg show. Financial stocks saw the most money removed among industry ETFs, losing $489.2 million during the past week.


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