U.S. Stocks Snap Four-Day Slump After Upbeat Employment Data
08/03/2012| 02:38pm US/Eastern
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By Matt Jarzemsky
NEW YORK--Stocks snapped a four-session slump, with the Dow industrials on pace for their steepest gain in more than a month, after the domestic economy added more jobs than expected in July.
The Dow Jones Industrial Average climbed 235 points, or 1.8%, to 13114 in mid-afternoon trading Friday. This put the blue-chip benchmark on pace for its highest close since early May.
The Standard & Poor's 500-stock index climbed 27 points, or 2%, to 1392. Financial and energy shares paced gains across all of the index's 10 sectors.
Kraft Foods Inc. (>> Kraft Foods Inc) rose 4%, leading the Dow higher. Fellow blue chip Procter & Gamble Co. (>> The Procter & Gamble Company) gained 3.3%. Both companies reported better-than-expected earnings.
The Nasdaq Composite Index advanced 63 points, or 2.2%, to 2973.
Knight Capital Group Inc. (>> Knight Capital Group Inc.) surged 36%. The stock had plunged 75% over the previous two sessions after a software glitch caused it to make erratic trades in 148 stocks. Knight has said the error, which has the brokerage firm struggling to stay afloat, will likely cost it $440 million.
U.S. payrolls increased by a seasonally adjusted 163,000 jobs in July, the U.S. Labor Department reported, topping economists' expectations for the addition of 95,000 positions. But the unemployment rate rose one-tenth of a percentage point, to 8.3%, versus expectations for it to remain flat at 8.2%.
"It is to be expected that the market is positive in direction," said Wasif Latif, who helps manage $50 billion in assets as vice president of equity investments at USAA in San Antonio. "As to the degree of strength, it's not all because of this data point being seen as an ultimate sign of recovery."
"I think that there could be some short-covering or panic buying going on," Mr. Latif added, referring to short sellers "covering," or unwinding bearish bets, which requires them to buy stock.
Service-sector activity expanded at a slightly faster pace in July than a month earlier, according to the Institute for Supply Management, bucking economists' expectations for the group's nonmanufacturing index to show slowing expansion.
European stocks traded higher, helped by the U.S. data, with the Stoxx Europe 600 up 2.4%. Spain's IBEX rose 6%.
Crude-oil prices jumped 4.8%, to $91.36 a barrel. Gold prices added 1.1%, to $1,607.80 a troy ounce. The dollar fell against the euro but rose versus the yen.
In corporate news, Zipcar Inc. (>> Zipcar Inc) tumbled 34% after the car-rental company trimmed its revenue outlook for the year and said it brought in fewer new members than anticipated.
LinkedIn Corp. (>> Linkedin Corporation) advanced 15% after the professional-networking website raised its revenue forecast for the year.
Medical-device designer Globus Medical Inc. (>> GLOS MED) jumped 18% on its first day of trading. The company's initial public offering on the New York Stock Exchange priced at the low end of its reduced target range. Business-software maker Eloqua Inc. (ELOQ), the other company to debut this week, rose, adding to the 12% gain it posted after shares started trading on Thursday.
Molycorp Inc. (>> Molycorp, Inc.) fell 30% after the rare-earth-mining company posted an unexpected quarterly loss, citing soaring expenses.
Facebook Inc. (>> Facebook Inc), which had fallen to an all-time low Thursday after disclosing additional details about its user base, rebounded 9.1%.
Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com.
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