S&P 500 on verge of 5-year high day ahead of jobs data

NEW YORK Thu Oct 4, 2012 5:56pm EDT

Traders work on the floor of the New York Stock Exchange, October 1, 2012. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange, October 1, 2012.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - The S&P 500 extended gains to a fourth day on Thursday, putting it on the cusp of a new five-year high if Friday's jobs report shows encouraging signs for the labor market.

The rally was broad, with all 10 S&P 500 sectors up and financials in the lead. The S&P's financial index .GSPF gained 1.5 percent.

In the tech arena, Google Inc (GOOG.O) shares hit a new 52-week high of $769.89 earlier in the session. The stock ended up 0.7 percent at $768.05.

The number of Americans filing new claims for unemployment benefits rose only slightly last week after a big drop the week before, the Labor Department reported on Thursday, leading to hopes that Friday's closely watched non-farm payrolls report would show improvement.

"We would expect that the market is going to break significantly in one direction or another on payrolls," said Peter Cecchini, managing director at Cantor Fitzgerald, in New York.

"At the same time, even if the market collapses, event volatility will drain out somewhat. That's not to say volatility overall will fall, but an increase in volatility will be offset by a subtle drop in event volatility."

The CBOE Volatility index .VIX, Wall Street's fear gauge, fell 5.7 percent to 14.55.

The Dow Jones industrial average .DJI gained 80.75 points, or 0.6 percent, to 13,575.36 at the close. The S&P 500 .SPX rose 10.41 points, or 0.72 percent, to 1,461.40. The Nasdaq Composite .IXIC added 14.23 points, or 0.45 percent, to end at 3,149.46.

The S&P 500 has climbed 16.2 percent so far this year. That strong gain, combined with weak global economic data and questions of whether Spain's bailout will come to pass, have prompted some investors to say the rally is starting to look overextended.

"The bulls have control over this market, clearly. When there is no terrible news, the market goes up," said Uri Landesman, president of Platinum Partners in New York.

"U.S. equities are considered as a flight to quality, which is quite surprising, considering the fact that the economy is not that strong," Landesman said.

The Federal Reserve released minutes from a September policy-making meeting that revealed some reservations about the U.S. central bank's latest stimulus. Market reaction was muted.

Coal companies' stocks rallied following Republican presidential nominee Mitt Romney's support of the coal industry during his televised debate with President Barack Obama on Wednesday night.

"By the way, I like coal," Romney said during the debate.

Shares of Arch Coal (ACI.N) rose 7.9 percent to $6.69 and shares of Alpha Natural Resources (ANR.N) gained 6.8 percent to $6.73.

European Central Bank President Mario Draghi, speaking at a regular monthly news conference, said "significant progress" had been made in Spain to bring order to its finances, although more was needed.

The weaker dollar lifted the prices of crude and basic metals, which helped buoy shares in the energy and materials sectors. An S&P index of energy shares .GSPE rose 1 percent, while an S&P index of materials shares .GSPM gained 1.3 percent.

Data showed U.S. retailers' September sales looked solid as shoppers wrapped up back-to-school buying and put the brakes on more big spending before the holiday season.

Costco Wholesale (COST.O) shares rose 1.9 percent to $101.48 after it reported a better-than-expected 6 percent rise in September sales at stores open at least a year.

Initial claims for unemployment benefits rose 4,000 to a seasonally adjusted 367,000, the Labor Department said, below economists' expectations for an increase to 370,000.

About 6.1 billion shares changed hands on the New York Stock Exchange, Amex and Nasdaq, compared with the average daily volume of 6.38 billion.

Advancers outnumbered decliners on the NYSE by a ratio of about 11 to 4. On the Nasdaq, more than four stocks rose for every two that fell.

(Editing by Jan Paschal)

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Comments (3)
percy1 wrote:
“U.S. equities are considered as a flight to quality, which is quite surprising, considering the fact that the economy is not that strong,”

Not really that surprising – how many other economies are doing better? There’s Germany, and indeed the DAX is up 40% year-over-year compared to 25% for the Dow and 30% for the S&P. Other than that, who else would you “flight” to?

Oct 04, 2012 4:57pm EDT  --  Report as abuse
Well, I certainly blew it when I sold all of my equity positions about 2 years ago. Funny thing though, I still can’t bring myself to invest in equities, even on a dollar cost averaging basis. I always advised people to never invest in something that you do not understand. In spite of my background in finance and economics I still cannot understand this market. I’ll just have to sit here and make 1 or 2%, pathetic, huh?

Oct 04, 2012 5:16pm EDT  --  Report as abuse
Harry079 wrote:
Keep smokin’ that QE Wall Street. I actually heard more than one “market guy” say today that the FUNDAMENTALS don’t matter anymore.

Yea and I have a bridge to sell you too.

Today we passed the $16 trillion mark on the Debt subject to the limit.

The stock market will drop 20% in the next few weeks.

Oct 04, 2012 11:35pm EDT  --  Report as abuse
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