More evidence of improving job growth helped the stock market post slim gains on Thursday, but it weighed on the bond market, where the yield on the Treasury’s 10-year note jumped to 3 percent for the first time in more than two years.
The Labor Department reported that the four-week average of applications for unemployment benefits fell to its lowest point since October 2007, two months before the recession officially began. And a survey from the payroll company ADP showed that American businesses added 176,000 jobs in August.
The encouraging news came a day before the government reports on employment growth in August. Many investors believe that solid growth will prompt the Federal Reserve to start tapering off its economic stimulus program later this month.
The Fed’s stimulus has helped drive a bull market in stocks that has lasted more than four years.
The improving job market means that “the Fed probably lays out a tapering schedule in September,” said Philip J. Orlando, chief equity strategist at Federated Investors.
While stock trading may be volatile in the coming weeks, Mr. Orlando said, investors will ultimately see the reduced stimulus as a positive sign because it means that the economy is strong enough to expand without the Fed’s help. “It should leave stocks in great shape,” he said
The Dow Jones industrial average rose 6.61 points, or less than 0.1 percent, to close at 14,937.48. The Standard Poor’s 500-stock index rose 2 points, or 0.1 percent, to 1,655.08. The Nasdaq composite index gained 9.74 points, or 0.3 percent, to 3,658.78.
Some retail stocks were among the bigger gainers for the day. Costco rose $3.12, or 2.8 percent, to $114.62 after the discount store chain said revenue at stores open at least a year rose 4 percent in August, slightly faster than Wall Street’s expectations. Walgreens rose 70 cents, or 1.4 percent, to $50.19 after reporting a 4.8 percent increase in sales last month.
In government bond trading, the price of the Treasury’s 10-year note fell 26/32, to 95 25/32, while its yield climbed to 3 percent, from 2.90 percent late Wednesday. The 10-year yield is the highest it has been since late July 2011, as bond traders anticipate that the Federal Reserve will cut back on its stimulus. The yield has risen sharply from a recent low of 1.63 percent in early May.
Rising yields on Treasury notes over the last few months have pushed up mortgage rates and other interest rates. The average fixed rate on a 30-year mortgage rose to 4.57 percent this week.
Stocks slumped in August, partly because of investors’ concern that the Fed would start winding down its stimulus program and higher interest rates would harm the economy. The S. P. 500 index fell 3.1 percent in August, its biggest monthly decline since May 2012.
It appears, however, that investors are getting more comfortable with higher borrowing costs.
“We don’t anticipate that a gradual rise in rates will choke off the economy,” said David W. Roda, regional chief investment officer for Wells Fargo Private Bank. “We are still looking at very low rates historically.”
Among the stocks on the move on Thursday, Conn’s fell $7.95, or 12 percent, to $60.36 after the consumer finance company reported second-quarter earnings that missed Wall Street expectations.
Groupon rose 36 cents, or 3.5 percent, to $10.66 after Morgan Stanley raised its recommendation on the stock to “overweight” as the company adjusted its business model.
Article source: http://www.nytimes.com/2013/09/06/business/daily-stock-market-activity.html?partner=rss&emc=rss