PIMCO: Bull market in U.S. stocks won't last

NEW YORK (Reuters) - Mohamed El-Erian, chief executive of bond fund manager Pacific Investment Management Co, said on Friday that U.S. stock markets are on a "prolonged sugar high" and that the bull market is unlikely to last.

"If we are in a bull market in stocks, it is unlikely to last," El-Erian told Reuters as the Dow Jones industrial average .DJI and Standard & Poor's 500 .SPX each gained 1.50 percent. "I think what we are seeing is just a prolonged sugar high for now," he added.

El-Erian helps oversee $850 billion in assets, including equities, at PIMCO.

The Dow gained more than 125 points while the S&P tacked on 15 points late Friday on news that the pace of U.S. job losses slowed more than forecast in July and the unemployment rate dropped for the first time in more than a year.

The S&P is up an astounding 52 percent from an intraday March 6 low of 666.79 to an intraday high Friday of 1,018. The Dow is up 43.5 percent from its closing low on March 9, while the Nasdaq is up 57.8 percent for the same period.

El-Erian said his concern is that stock markets have been turbo-charged by temporary and potentially reversible factors, including Federal Reserve programs and fiscal stimulus. He added that Corporate America has been able to surpass earnings expectations by way of layoffs and cutbacks in capital spending.

"It's too early to call for a sustained and vigorous recovery," El-Erian said. "Given the need to de-lever further, it is not certain which component of private demand will take over from the government as the driver of employment growth."

July payrolls fell by 247,000, after a 443,000 loss in June, the Labor Department said Friday. The jobless rate unexpectedly dropped to 9.4 percent from 9.5 percent.

PIMCO believes that several risk assets, including U.S. equities, are overbought relative to the realities of the fundamentals, he added.

(Additional reporting by Chuck Mikolajczak; Editing by Dan Grebler)