US Stocks surge

In a notable contrast to the springtime sell-offs of the past three years, the Dow Jones industrial average rose above 15,000 during the day, though it closed slightly below the mark, while the S&P 500 crossed the 1,600-point mark – in both cases for the first time.
The latest gains followed reports from the U.S. Labor Department showing that employers added 165,000 jobs in April and the unemployment rate fell to 7.5 per cent, its lowest level since December, 2008. The results topped consensus expectations.
Economists had been expecting far more modest job gains of 140,000, with unemployment holding steady at 7.6 per cent. Even more impressive, February and March payrolls were revised higher, by 114,000 jobs.
As good as the numbers were, they weren’t good enough to raise concerns that the U.S. Federal Reserve will ease back stimulus in the form of bond-buying, or quantitative easing (QE) – a powerful elixir that is largely credited for extending the bull market, now in its fifth year.
Andrew Grantham, an economist at CIBC World Markets, said in a note the payrolls report will reassure markets “that the U.S. economy is not as weak as it may have seemed given some of the earlier data, although it may not be strong enough on its own to see renewed talk of tapering QE.”
The S&P 500, the most widely followed market index, has now risen more than 13 per cent in the first four months of 2013, putting it on track for its best yearly performance since 2009, when stocks were in the early stages of recovering from a deep bear market.
The benchmark has powered well above the targets issued by Wall Street strategists at the start of the year. On average, strategists had seen the S&P 500 rising to 1,534 by the end of 2013 – well below the 1614.42 it closed at Friday.
The gains have come despite a lacklustre outlook for global growth. The U.S. economy expanded by just 2.5 per cent in the first three months of 2013, while China’s growth is slowing and the euro zone remains stuck in recession.
The stock market has largely ignored this sluggish backdrop and focused instead on efforts to fix it.
Earlier this week, the European Central Bank cut its key lending rate to a record low 0.5 per cent and said it was prepared to do more. Japan’s central bank has embarked upon stimulus efforts of its own, which has helped drive up the benchmark Nikkei 225 by nearly 32 per cent this year.
The recent gains by U.S. stocks come with some concerns, though. One fear is that the Federal Reserve’s QE program, which involves creating large amounts of money to purchase assets, will ultimately stoke inflation.
“No one knows if the QE experiment will ultimately prove to be successful,” said Michael Hartnett, chief investment strategist at Bank of America, in a note. “But we do know the ‘journey’ involves asset price inflation.”
The S&P 500 has not suffered so much as a 5 per cent dip since November.
The biggest decline of the year was in April, when the index fell 3.3 per cent, but recovered quickly. That modest decline arrived at a time in the year that has been a rough patch for stocks in recent years. Last year, the S&P 500 fell nearly 10 per cent between April and June. In 2011, it fell more than 19 per cent between April and October. And in 2010, it fell about 16 per cent between April and July.
With markets roaring into the start of May, this year is set to break the pattern – even as observers warn that smooth rides don’t last forever


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