Signs U.S. hiring remains robust and one of the best earnings seasons for technology companies pushed the Nasdaq Composite Index above its record close for the first time in a year, putting it on the verge of joining the S&P 500 Index at an all-time high.
Stocks in the gauge rallied for the eighth time in nine days and are on course for the sixth straight weekly advance, the longest since November. Since firms started reporting earnings a month ago, companies from EBay Inc. to Seagate Technology and Biogen Inc. have jumped more than 20 percent.
Should it hold, Friday's advance would make the Nasdaq the last major U.S. index to come full circle since the selloff that ripped global equities starting last summer. From its high on July 20, 2015, the gauge slid as much as 18 percent over the next seven months, narrowly avoiding a bear market.
The Nasdaq Composite climbed 1 percent to 5,220.13 at 2:59 p.m. in New York, above its record close at 5,218.86. The S&P 500 increased 0.7 percent to 2,180.23, a third consecutive advance on the way to a fresh all-time high. The Dow Jones Industrial Average added 165.25 points, or 0.9 percent, to 18,517.30, for just its second gain in nine sessions.
"These are good numbers across the board," Darrell Cronk, president of Wells FargoInvestment Institute in New York, said by phone. "I don't think it brings the Fed back to the table for September, but there are more people entering the workforce which is healthy. The story with these numbers is higher equity prices, higher yield and higher dollar."
A report Friday showed payrolls climbed by 255,000 in July, exceeding all forecasts in a Bloomberg survey of economists, following a 292,000 gain in June that was a bit larger than previously estimated. The jobless rate held at 4.9 percent, and wage growth offered more promising signs of acceleration, with average hourly earnings rising the most since April.
Traders had pushed out their expectations on the timing for higher borrowing costs following a weaker-than-forecast reading last week on U.S. growth and Thursday's Bank of England interest-rate cut. Following the jobs data, the first month with at least even odds for a Federal Reserve rate hike is now March 2017, versus November of next year before the report. Chances for a move next month rose to 26 percent from 18 percent Thursday.
"This number confirms the broader economy is on firm footing, and the market reaction higher is predictable," said Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel, Nicolaus & Co., which oversees about $170 billion. "It's still likely that the Fed will raise interest rates, but not until after the election. Monetary policy from the BOJ and BOE is doing the Fed's job right now, giving the Fed a little more runway."
Speculation that central banks will remain supportive of markets and better-than-estimated corporate earnings have boosted equities to all-time highs, after brief but sharp losses spurred by the U.K.'s vote to leave the European Union. A period of relative calm has also since permeated the equity market, with the CBOE Volatility Index poised for a two-year low, 34 percent below its five-year average. The measure of market turmoil known as the VIX fell 8.2 percent Friday to 11.40.
The S&P 500 had hovered near a record since mid-July, with declines in crude and lackluster consumer spending stoking investor anxiety earlier this week. The stronger-than-forecast jobs report alleviated those concerns, lifting the gauge back to record levels. The index has rallied 19 percent since hitting a 22-month low back in February.
With the earnings season more than three-quarters of the way through, about 77 percent of S&P 500 firms that have reported so far beating profit projections and 56 percent exceeding sales forecasts. Analysts have tempered their estimates for a decline in second-quarter net income at the gauge's members to 2.7 percent, from 5.8 percent less than a month ago.
Boosting the Nasdaq Friday, Priceline Group Inc. advanced 3.6 percent after its quarterly profit topped estimates as the number of hotel rooms booked through its websites increased and the impact of terrorism on tourism to Europe was muted. Kraft Heinz Co. rose 3.6 percent after its earnings also exceeded forecasts, as cost cuts helped bolster margins. Technology heavyweights Apple Inc., Intel Corp. and Microsoft Corp. increased more than 1 percent.
Microsoft and Intel are among the biggest pillars of the Nasdaq's advance since its last record in July 2015, with the two up at least 20 percent. The strongest contributor to hoisting the index was Amazon.com, with a 57 percent increase. Another big benefactor, Facebook has risen 28 percent, on the way today to its own all-time high.
Banks rallied Friday to lead financial shares in the S&P 500 to their biggest gain in nearly a month, up 1.7 percent. Among the index's 10 main industries, consumer discretionary, technology and industrial stocks increased at least 0.9 percent. Utilities and phone companies slipped.
Lenders posted their strongest advance since June 29, as the employment report helped send Treasury yields to their steepest climb in three weeks, brightening prospects for a boost to earnings from higher rates. Bank of America Corp. and Citigroup Inc. rose at least 3.5 percent. Regional banks Zions Bancorporation and KeyCorp. surged more than 3.9 percent.
Insurers also jumped on speculation higher rates will benefit earnings, particularly after MetLife Inc. tumbled Thursday following weaker-than-forecast results. Its shares rebounded 4.2 percent Friday, while Lincoln National Corp. and Prudential Financial Inc. added more than 4.3 percent.
Auto-related stocks trimmed weekly losses after the jobs data, led by parts suppliers Delphi Automotive and BorgWarner which gained more than 2.1 percent. General Motors and Ford Motor climbed at least 1.1 percent. The carmakers were hammered on Tuesday, falling more than 4 percent, after their July sales disappointed.
Bristol-Meyers Squibb weighed on health-care, with its nearly 16 percent plunge the biggest in 14 years on a closing basis. The company said the use of its drug Opdivo as a single agent for lung cancer failed in a trial that would have been the basis for widely expanding use of the treatment. Merck & Co., maker of Opdivo's main competitor Keytruda, gained 8.5 percent, the most since 2009.
By: Oliver Renick and Joseph Ciolli (Bloomberg).
Contributing: Shobhana Chandra, Michelle Jamrisko Justin Villamil and Bailey Lipschultz.
Photo: The Wall Street Journal.
Review: Emerging Market Formulations & Research Unit, FLAGSHIP RECORDS.
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