U.S. stock futures rise after hiring jumps more than forecast
INVESTORS SAW FRIDAY'S jobs report as being ideal for continued Federal Reserve stimulus actions - despite an increase in the number of people in jobs, with more people entering the labor force, the unemployment rate went up slightly in May. Early trading on the New York Stock Exchange looked like the markets would end up higher for the second day in a row.
BLOOMBERG NEWS FILE PHOTO/JIN LEE
By Inyoung Hwang and Sarah Jones Bloomberg News
NEW YORK - U.S. stock-index futures climbed, indicating a second day of gains for the Standard & Poor’s 500 Index, as investors weighed the Federal Reserve’s stimulus plans after data showed employment increased more than forecast in May and the jobless rate rose.
Yum! Brands Inc. rose 1 percent after UBS AG recommended investors buy the shares. Gap Inc. advanced after reporting same-store sales for May that beat analyst estimates.
Standard & Poor’s 500 Index futures expiring this month jumped 0.6 percent to 1,631.70 at 8:56 a.m. in New York, after the gauge snapped a two-day losing streak yesterday. Contracts on the Dow Jones Industrial Average added 60 points, or 0.4 percent, to 15,096 today.
“This report’s in the sweet spot,” Brian Jacobsen, who helps oversee $221.2 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wis., said by telephone. “It shows investors that the economy is growing but not fast enough for them to be concerned that the Fed is going to start tapering its asset purchase program. It’s in the perfect spot for investors to stop worrying of pre-mature tapering.”
The Fed stimulus and better-than-expected earnings have propelled the bull market in U.S. equities into a fifth year and driven the S&P 500 up 140 percent from a 12-year low in 2009. The index has dropped 2.8 percent since closing at a record high on May 21, the day before Fed Chairman Ben S. Bernanke suggested the central bank could curtail its $85 billion monthly bond purchases if the job market improved in a “real and sustainable way.”
Equity futures surged after a Labor Department report showed payrolls rose 175,000 last month after a revised 149,000 increase in April that was smaller than first estimated. The jobless rate climbed from a four-year low as more Americans entered the labor force.
Investors have scrutinized labor-market data as Fed policy makers continue to debate whether the economy is strong enough to begin reducing monetary stimulus. Data yesterday showed initial jobless claims fell by 11,000 to 346,000 in the week ended June 1. A report June 5 indicated companies in the United States hired fewer workers than projected in May.
The Fed will scale back bond buying to $65 billion at the Oct. 29-30 meeting of the Federal Open Market Committee, according to the median estimate in the survey of 59 economists this week. In a similar survey before the Fed’s April 30-May 1 meeting, economists expected the central bank to cut purchases to $50 billion in the fourth quarter. The FOMC next meets June 18-19.
“Even those who are advocating for tapering are thinking that it could be a pretty small first step to see how it goes,” said Julia Coronado, chief economist for North America at BNP Paribas in New York and a former Fed economist. “That’s one of the few things we’ve learned” from the debate among policy makers.
Yum! climbed 1.3 percent to $72.01. UBS raised its recommendation for the owner of KFC to buy from neutral and added the company to its U.S. “key call” list, saying sales and profitability in China will start to improve from the impact of recent health scares in the country.
Gap advanced 2.4 percent to $41.95 after the largest U.S. specialty-apparel retailer reported a 7 percent increase in total comparable sales for last month. Analysts had projected a 3.7 percent gain, on average, according to researcher Retail Metrics Inc.