Stocks rise on unexpectedly strong job gains
NEW YORK (AP) — Stocks rose Friday as investors reacted to an unexpectedly strong October jobs report.
Investors are still cautious because Friday's jobs numbers and Thursday's surprisingly strong report on U.S. economic growth could prompt the Federal Reserve to start pulling back on its economic stimulus.
The reaction to the report was more notable in the bond market than it was in the stock market. The yield on the 10-year Treasury note jumped to its highest level in three weeks as investors sold bonds.
The gains in stocks were led by financial companies, such as Bank of America and Citigroup, that could benefit from higher interest rates.
The Standard & Poor's 500 index was up 11 points, or 0.6 percent, to 1,758 as of 11:15 a.m. Eastern time. The Dow Jones industrial average was up 75 points, or 0.1 percent, to 15,604. The Nasdaq composite rose 38 points, or 1 percent, to 3,896.
The yield on the 10-year note jumped to 2.74 percent from 2.60 percent on Thursday, its highest level since Oct. 15.
Housing stocks were among the biggest decliners on Friday.
Higher Treasury yields lead to higher mortgage rates, and that in turn can hurt demand for homes. Lennar fell $1.29, or 3.7 percent, to $32.95. PulteGroup dropped 58 cents, or 3.3 percent, to $16.92.
The government reported that U.S. employers added 204,000 jobs in October, an unexpected burst of hiring during a month in which the federal government was partially shut down for 16 days. The job additions were far greater than the 130,000 economists were expecting, according to FactSet, a financial data provider.
It was the second piece of unexpectedly robust economic news that Wall Street received in the past two days. The Commerce Department said Thursday that the U.S. economy grew at a 2.8 percent annualized rate in the third quarter, better than the 2.5 percent rate economists were looking for.
The Federal Reserve has been buying $85 billion worth of bonds each month since December in an effort to keep interest rates low and boost the economy. Due to the design of the program, the Fed's actions have had a secondary effect of driving up stock prices by making bonds look expensive by comparison.
Some investors believe that the Fed now has enough evidence that the U.S. economy is going better to start pulling back its stimulus program as early as its December meeting.
"It's a close call, but these numbers point to the Fed (pulling back) in December or in January," said David Kelly, chief global strategist at JPMorgan Funds, which oversees about $400 billion in assets.
AP Markets Writer Steve Rothwell contributed.