By Saumya Vaishampayan
U.S. stocks rose Friday while bonds fell after data showed a
strong pace of job creation in November, but didn't significantly
alter investor expectations for a Federal Reserve rate increase in
the second half of next year.
The dollar jumped to fresh highs against the euro and the yen,
underscoring traders' expectations that the Federal Reserve will
raise short-term interest rates in 2015, even as the Bank of Japan
is ramping up its easing steps and the European Central Bank is
expected to soon take its own new stimulus measures.
The Labor Department reported that nonfarm payrolls rose a
seasonally adjusted 321,000 last month, the strongest month of
hiring since January 2012. Economists surveyed by The Wall Street
Journal expected the creation of 230,000 jobs in November.
The Dow Jones Industrial Average gained 56 points, or 0.3%, to
17956. The blue-chip index hit a fresh intraday record Friday.
The S&P 500 added three points, or 0.2%, to 2075. The Nasdaq
Composite Index rose 12 points, or 0.3%, to 4781.
The jobs report reinforced the case for stocks going higher,
said Kate Warne, investment strategist at Edward Jones. "More jobs
means more consumer spending," she said. "That means better overall
growth and earnings, which is good news for stocks."
At the same time, the report isn't enough to prompt the Fed to
raise rates sooner than expected, said Ms. Warne. Fed officials
"are very tolerant of better-than-expected jobs growth because
that's what they've been waiting to see," she said.
Many investors say the backdrop for stocks remains positive.
Stocks have hit a series of records in recent weeks as data have
confirmed the U.S. economy and corporate earnings are both growing.
In fact, the U.S. is on track to post its strongest year of job
growth since 1999. Easing efforts by major central banks will
maintain pressure on already-low global interest rates, making
stocks appear more attractive than other assets.
Stocks can continue to gain even when the Fed begins to raise
short-term interest rates, partly because the increases are
expected to be gradual, said Jack Caffrey, portfolio manager at
J.P. Morgan Private Bank. A pullback in stocks would come if
inflation starts to pick up to a point that concerns the Fed,
resulting in bigger interest-rate increases, he said.
Financial stocks rose the most on the S&P 500, pushing the
sector up 1.1%. Stocks in the utilities sector, which are often
viewed as proxies for bonds, fell 1.1%.
The jobs report could persuade some investors with cash in their
portfolios to put some of that money into stocks, said Aaron Jett,
vice president of global equity research at Bel Air Investment
Advisors. "Sentiment is a big part of putting money to work," he
said. "This report reinforces the positive sentiment in the
market."
The dollar rose to Yen121.59 from Yen120.49 ahead of the jobs
data. It hit a new seven-year high in the wake of the report. The
euro fell to a fresh two-year low against the dollar, trading at
$1.2292 versus $1.2368 before the report.
Bets that the Fed will raise rates at its Sept. 2015 policy
meeting rose only slightly to 58% after the strong November jobs
report, from 56.9% Thursday, based on pricing for federal funds
rate futures from the CME Group. Odds for a June move ticked up to
23% from 22.3%.
Still, elsewhere in the bond market prices fell as the
affirmation of steady economic growth in the U.S. sapped investors'
appetite for U.S. Treasurys.
The benchmark 10-year note yield rose to 2.307%. Before the
report was released, the note was yielding 2.26%. When bond yields
rise, prices fall.
"If we have two or three more strong jobs reports like this, it
increases the chance that the Fed would raise interest rates sooner
than many have thought," said Gary Pollack, who helps oversee $12
billion as head of fixed-income trading in New York at Deutsche
Bank AG 's private wealth management unit.
Gold, another traditional safe haven, also fell after the jobs
report. Gold futures declined 1.1% to $1,194.90 an ounce.
Crude-oil futures were on track to settle at another multiyear
low, falling 2% to $65.46 a barrel. Energy stocks on the S&P
500 fell 1.1%.
Stocks and bonds climbed in Europe, with the Stoxx Europe 600 up
1.7%.
In corporate news, Dollar Tree Inc. said its pending $8.5
billion acquisition of Family Dollar Stores Inc. could close as
early as February. Dollar Tree said it would have to shed a small
number of stores for antitrust approval of the deal. Shares of
Dollar Tree fell 0.7%, while those of Family Dollar were little
changed.
Shares of Google Inc. fell 1.8%. Bank of America Merrill Lynch
cut the company to a neutral rating from buy.
Min Zeng contributed to this article.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
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