In the U.S.: U.S. Stock Futures Rise as Jobless Rate Declines

5 October 2012

Turning point in Presidential race? “Today’s employment report is the penultimate before the November elections.”

U.S. stock futures rose, with the Standard & Poor’s 500 Index heading for the first weekly gain in three, after data showed the nation added 114,000 jobs last month and the unemployment rate unexpectedly fell.

Bank of America Corp. and Goldman Sachs Group Inc. jumped at least 0.9 percent to lead advances among financial companies. Zynga Inc. (ZNGA) slid 21 percent after cutting its forecast for full- year bookings. Biogen Idec Inc. (BIIB) declined 0.6 percent as Oppenheimer & Co. downgraded the shares.

S&P 500 futures expiring in December rose 0.5 percent to 1,462.4 at 8:42 a.m. in New York. The equity benchmark has rallied 1.4 percent this week as U.S. economic reports topped estimates. Dow Jones Industrial Average futures added 51 points, or 0.4 percent, to 13,549 today.

“On balance the report looks pretty decent,” Mark Luschini, who helps manage $54 billion as chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, said in a phone interview. “The September number was pretty close to being spot on consensus and it came with an upwards revision to the August number. The market reaction is positive on a report that’s solid even if it’s unspectacular.”

The economy added 114,000 workers last month after a revised 142,000 gain in August that was more than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for an advance of 115,000. The jobless rate dropped to 7.8 percent from 8.1 percent and hourly earnings climbed more than forecast.

November Elections

Improving employment prospects that lead to stronger wage growth provide workers with the wherewithal to boost their spending, helping cushion the economy from a global slowdown. Today’s employment report is the penultimate before the November elections as PresidentBarack Obama and challenger Mitt Romney debate whose policies would best spur job growth.

The S&P 500 has rallied 16 percent this year as central banks from the U.S. to China took steps to stimulate economic growth. The Federal Reserve last month announced a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets “improve substantially.”

For the first time this year, hedge funds are turning away from a rally in the global stock market. The ratio of bullish to bearish bets among professional speculators fell last week and is below historical averages, according to a survey by International Strategy & Investment Group. The reduction came as the MSCI All-Country World Index (MXWD) extended its yearly advance to 12 percent and contrasts with January, when managers bought shares as they rose, data compiled by ISI and Bloomberg show.

Banks Rally

Financial companies rallied today. Bank of America jumped 1.4 percent to $9.54. Goldman Sachs climbed 0.9 percent to $121.

Zynga plunged 21 percent to $2.23 as the online-game maker cut its forecast for full-year bookings, a predictor of sales, citing lower demand for titles such as “The Ville.”

Bookings this year will be in the range of $1.085 billion to $1.1 billion, compared with an earlier forecast of $1.15 billion to $1.225 billion, Zynga said after markets closed yesterday. The San Francisco-based company also wrote down the value of its acquisition of OMGPop Inc.

Facebook Inc. (FB) slipped 2.3 percent to $21.45. Zynga makes most of its money by selling virtual goods in games played on Facebook’s social network.

Biogen Falls

Biogen Idec lost 0.6 percent to $151.69 after Oppenheimer lowered its recommendation on the third-largest U.S. biotechnology company to market perform, the equivalent of hold, from outperform.

The price of bearish options on U.S. makers of household goods has fallen to the lowest level in 13 months on speculation the stocks will beat the market as the economy slows.

Puts with an exercise price 10 percent below the Consumer Staples Select Sector SPDR Fund cost 4.75 points more than calls betting on a 10 percent rally, according to six-month implied volatility data tracked by Bloomberg. The price relationship known as skew for the exchange-traded fund, which tracks companies like Procter & Gamble Co. and Wal-Mart Stores Inc., reached 4.67 on Sept. 14, the lowest level since August 2011.


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