Upbeat economic reports send stocks surging
The stock market notched its biggest gain in three months Wednesday amid a batch of promising economic reports and at least a momentary easing of concerns about the European debt crisis.
The Dow Jones industrial average rose almost 250 points, and equity markets around the world were broadly higher.
On Wall Street, the rally was driven by rising confidence among investors that the U.S. economic recovery was gaining traction and that job growth was finally starting to pick up.
Investors were encouraged by a report estimating that U.S. private employers added a better-than-expected 93,000 jobs last month. A strong manufacturing report from China also bolstered the outlook for global growth.
“We’re finally in a sustainable recovery,” said Jim Paulsen, chief investment strategist for Wells Capital Management. “That’s what this rally is all about.”
Other reports on Wednesday showed a continuing rebound in U.S. auto sales in November and that American workers’ productivity grew at a 2.3% annual rate in the third quarter, an improvement from the initial estimate of 1.9%.
But while “all that stuff is great in principle, the reality is it’s payrolls, payrolls, payrolls” that are the main focus, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank in New York.
Last month’s U.S. private-sector job growth was the biggest in three years, according to the report Wednesday by payroll-processing company Automatic Data Processing Inc. and economic consulting firm Macroeconomic Advisers. The report also showed that 82,000 jobs were created in October, up from an initial estimate of 43,000.
The ADP report each month comes ahead of the government’s monthly tally of broad employment trends. That report for November will be issued Friday, and economists surveyed by Bloomberg News are expecting it to show that the private sector overall created 155,000 jobs last month, close to the 159,000 net jobs added in October.
U.S. stock prices have rallied sharply since late August, fueled in part by anticipation of a better economy. Although the market was hit by some profit-taking in November, the selling was relatively modest.
On Wednesday buyers returned in force. The Dow advanced 249.76 points, or 2.3%, to 11,255.78. That left it 1.7% below its two-year closing high of 11,444 reached Nov. 5.
The Standard & Poor’s 500 index jumped 25.52 points, or 2.2%, to 1,206.07 and the Nasdaq composite index surged 51.20 points, or 2.1%, to 2,549.43.
Rising stocks outnumbered losers by more than 3 to 1 on the New York Stock Exchange.
In a sign of the rally’s breadth, indexes of smaller stocks hit new two-year highs. The Russell 2,000 index rose 2.2% to 743.14, its highest since Sept. 19, 2008.
After weeks of heavy selling triggered by debt concerns, European markets rebounded.
Spanish stocks jumped 4.4%, and French shares gained 1.6%.
European stocks were helped as government bond yields across the euro-zone plunged on speculation that the European Central Bank, which meets Thursday, will take new steps to shore up confidence in the financial system, perhaps by ramping up purchases of government bonds.
The yield on two-year Spanish bonds tumbled to 3.55% from 3.88% on Tuesday. Italian two-year bond yields slid to 2.71% from 2.98%.
Bond yields also fell in Ireland, which over the weekend agreed to a bailout by the European Union.
But some investors sold U.S. bonds, reacting to the strong economic data.
The 10-year T-note yield jumped to 2.96%, up from 2.79% on Tuesday. The five-year T-note rose to 1.61%, up from 1.47% on Tuesday and its highest since early August.
walter.hamilton@latimes.com
tom.petruno@latimes.com
