By Dan Strumpf
U.S. stocks extended their gains Monday, rebounding from an
early loss, in the first trading session following the release of
March's disappointing jobs report.
The Dow Jones Industrial Average rose 174 points, or 1%, to
17937, bouncing back from a loss of 116 points shortly after the
opening bell. The S&P 500 gained 20 points, or 1%, to 2087. The
Nasdaq Composite added 41 points, or 0.9%, to 4928.
The Labor Department on Friday said U.S. employers added 126,000
jobs in March, the weakest pace of hiring in 15 months. With the
U.S. stock market closed for the Good Friday holiday, Monday was
the first chance for investors in stocks to react to the
report.
Stocks were helped Monday by investors putting money to work
following last week's declines, traders said. Energy stocks in
particular got a lift from a rally in oil prices of more than 5%.
Trading activity was relatively subdued, with many overseas markets
still closed Monday.
"You saw some tentative trading last week that I think had some
people sitting on their hands a bit, sitting in cash," said Justin
Wiggs, managing director of equity trading at Stifel Nicolaus. "It
seems like guys are putting cash to work today."
The labor report for March was the latest in a series of
indicators to show economic growth has slowed in recent months.
That is giving investors pause ahead of what is shaping up to be a
weak first-quarter earnings season, which unofficially begins this
week when Alcoa Inc. reports results after the close of trading
Wednesday.
Investors are contending with several forces working against
corporate bottom lines. A sharply stronger dollar is reducing
profits at large, multinational companies. At the same time, energy
companies continue to deal with the hit to their earnings from the
slump in U.S. oil prices. In all, analysts expect earnings at
S&P 500 companies to decline 4.8% from a year ago, according to
FactSet.
"We've been seeing more research coming out about negative
earnings for the first quarter," said Hayes Miller, head of
multiasset North America at Baring Asset Management, which manages
$42 billion. "There's beginning to be some questioning about what
we're paying for."
Mr. Miller also said signs of wage growth will make it difficult
for many large companies to continue expanding profit margins. He
said he recently boosted his holdings of European and Japanese
stocks, at the expense of U.S. shares.
"The stronger economy is leading to stronger wages, and that
should spell the end of peak profit margins," he said.
Still, March's jobs report, though weaker than expected, hasn't
done much to alter investor expectations that the Federal Reserve
will begin to raise interest rates later in the year, traders said.
The central bank has said it plans to take a slow-but-steady
approach to rate increases, with an eye toward economic data. "I
don't think the Fed knows any better than you and I when they're
going to raise rates," said Jesse Lubarsky, senior vice president
and equity trader at Raymond James.
Energy stocks pulled ahead of the broader market, with the
S&P 500 Energy Index gaining 2.2%. Utilities in the S&P 500
rallied 1.6%.
In other markets, Treasury prices fell Monday, lifting the
10-year yield to 1.901% from 1.840% on Friday. Gold futures gained
1.4% to $1217.30 an ounce. Crude-oil futures soared 5.5% to $51.84
a barrel.
This year has been an uneven one for U.S. stocks, as investors
weigh the Fed's rate outlook and a rough patch in corporate
earnings. The Dow has gained 0.6% for the year, while the S&P
500 has added 1.3%. The choppy action in stocks so far this year is
consistent with a view held by many investors that stock gains in
2015 will be smaller than in previous years.
On the list of concerns for equity investors is the timing of an
eventual increase in interest rates by the Federal Reserve. The Fed
has emphasized that it is in no rush to raise short-term rates,
which have been held near zero since December 2008.
Meanwhile, shares of Hudson City Bancorp Inc. fell 6.7% after
the company said its planned merger with M&T Bank Corp. has
been delayed again and won't close by the previously announced date
of May 1. M&T's shares lost 2.9%.
Tesla Motors Inc. shares jumped 7.7% after the car maker said it
delivered 10,030 vehicles in the first quarter--500 vehicles above
its initial forecast and 55% more than the same period a year
earlier.
Ventas Inc. shares rose 5.1% after the company agreed to buy
Ardent Medical Services Inc. for $1.75 billion in cash, and said it
would spin off its skilled nursing facilities into an independent
real-estate investment trust.
Several stock markets in Asia and Europe were closed Monday.
Write to Dan Strumpf at daniel.strumpf@wsj.com
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