By Dan Strumpf
A rally in U.S. stocks nudged the Dow industrials back into
positive territory for the year, as investors looked past Friday's
disappointing jobs report to scoop up some bargains.
The Dow Jones Industrial Average rose 117.61 points, or 0.7%, to
17880.85, bouncing back from a loss of 116 points shortly after the
opening bell. The S&P 500 gained 13.66 points, or 0.7%, to
2080.62, and the Nasdaq Composite added 30.38 points, or 0.6%, to
4917.32.
With the U.S. stock market closed for the Good Friday holiday,
Monday gave stock investors their first chance to react to the
March jobs report, which showed U.S. employers added 126,000 jobs
in March, the weakest pace of hiring in 15 months. The report was
the latest evidence of a rough patch for the U.S. economy, but it
did little to damp investor enthusiasm for stocks Monday. Traders
said that many investors had been positioned for a sluggish jobs
report, and stepped in to buy shares at lower prices following an
early-morning slide in prices. A decline in the bond market also
drew buyers of stocks.
"There were very muted expectations for the numbers on Friday,"
said David Seaburg, head of sales trading at Cowen and Co.
Trading volumes were light Monday, with many overseas markets
closed.
Energy stocks got a lift from a rally in oil prices of more than
6%. The S&P 500 Energy Index rose 1.8%, pulling ahead of the
broader market. Utilities in the S&P 500 were the top performer
behind energy shares, rallying 1.3%.
This year has been an uneven one for U.S. stocks, as investors
weigh the outlook for rate increases by the Federal Reserve, as
well as an expected contraction in first-quarter earnings. With
Monday's gains, the Dow re-entered positive territory for the year,
now up 0.3% in 2015, while the S&P 500 has added 1.05%. 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.
The weak labor report is one of many factors 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
monthslong 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 for 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. On
Monday, William Dudley, president of the Federal Reserve Bank of
New York, said the recent economic slowdown has been caused in part
by temporary factors, including the recent harsh winter.
"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.
In other markets, Treasury prices fell Monday, lifting the
10-year yield to 1.902% from 1.840% on Friday. Gold futures gained
1.5% to $1218.60 an ounce. Crude-oil futures soared 6.1% to $52.14
a barrel.
Shares of Hudson City Bancorp Inc. fell 6.9% 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 2.7%.
Tesla Motors Inc. shares jumped 6.3% 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% 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.
Write to Dan Strumpf at daniel.strumpf@wsj.com
Access Investor Kit for Alcoa, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0138171014
Access Investor Kit for The Dow Chemical Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US2605431038
Access Investor Kit for Hudson City Bancorp, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4436831071
Access Investor Kit for M&T Bank Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US55261F1049