Dow Surges 370 Points, Capping Rocky Week

Solid jobs report helps cement case for interest rate increase later this month

By LESLIE JOSEPHS and
CHRISTOPHER WHITTALL

Updated Dec. 4, 2015 4:18 p.m. ET 18 COMMENTS

The Dow capped a rocky week with its biggest point gain in nearly three months after investors cheered a solid U.S. jobs report that bolstered the case for the U.S. Federal Reserve to raise interest rates this year.

The Dow Jones Industrial Average rose 370 points, or 2.1%, to 17848, erasing the previous session’s sharp losses and sending the Dow into positive territory for the week. The index notched its biggest point gain since Sept. 8.

Gains accelerated after European Central Bank President Mario Draghi said the bank was open to further stimulus measures.

The U.S. economy added 211,000 jobs in November and the unemployment rate remained at 5%. Fiduciary Trust's Ron Sanchez explains the new data's expected impact on the Federal Reserve's upcoming decision on interest rates and what it means for investors. Photo: Reuters

The ECB would “no doubt” step up stimulus measures if needed, Mr. Draghi said Friday, speaking in New York.

Mr. Draghi’s comments appeared to reassure investors a day after the central bank eased policy less than many had expected, sending markets into a tailspin.

“I think [Draghi] is putting in a little bit of work to explain more clearly what the ECB was doing yesterday,” said Shaun Osborne, Chief FX Strategist at Scotiabank, adding that the ECB did unveil big stimulus measures.

“It’s very possible that they are back at it next year,” said Mr. Osborne.
The gains were also fueled by a strong U.S. jobs report. The data, which was roughly in line with estimates, reaffirmed expectations that the economy is healthy enough for the U.S. Federal Reserve to start to raise short-term interest rates for the first time in almost a decade, and that they would do so cautiously.
“This pretty much locks in the first rate hike this month,” said Brian Nick, head of tactical asset allocation at UBS Wealth Management Americas. “It’s reflective of economic strength in the U.S.,” he said, which is a positive sign for corporate profits and future stock-market gains.
ENLARGE
Chair Janet Yellen has indicated interest-rate increases will come slowly in the months ahead amid tepid growth overseas and divergent monetary policies between the U.S. and other nations. PHOTO: JONATHAN ERNST/REUTERS


If the Fed raises rates later this month, it would solidify a divergence in monetary policy with Europe, which is ramping up stimulus efforts.
Markets on Friday reversed some of Thursday’s big swings, when stocks and government bond prices fell sharply in Europe and the U.S. and the euro surged after the European Central Bank disappointed investors.
Asian stocks fell Friday. European shares declined but pared losses following U.S. gains.
The S&P 500 and the Nasdaq Composite also rose 2.1%.
All sectors of the S&P 500 rose except for energy, which dropped 0.5%. Crude oil prices fell as the Organization of the Petroleum Exporting Countries ended a meeting without an agreement to restrain production, leaving members to continue pumping crude at near-record levels into an oversupplied market. U.S. crude oil declined 2.8% to $39.90 a barrel.
Friday’s jobs report is the last major gauge of the health of the labor market before the Fed meets in mid-December. The U.S. Labor Department said nonfarm payrolls increased a seasonally adjusted 211,000 jobs in November, beating expectations for 200,000 jobs.
Investors’ expectations for the Fed to raise rates cautiously helped fuel rallies in assets that have declined recently.
U.S. government bond yields declined after a brief rise.
MORE ON THE JOBS REPORT





“The first rate hike is a done deal but the path is going to be shallow,’’ saidGary Pollack, who helps oversee $12 billion as head of fixed-income trading in New York at Deutsche Bank’s private wealth management unit.
The yield on the two-year note, highly sensitive to expected changes in the Fed’s interest-rate policy outlook, was 0.943%, according to Tradeweb. It earlier had risen to a session high of 0.987% after the jobs report. The yield was 0.95% before the data.
When bond yields rise, their prices fall.
The yield on the benchmark 10-year Treasury note was 2.278%, compared with 2.328% Thursday.
Gold futures were up 2.3% at $1,085.60.
The euro was down 0.8% against the U.S. dollar at $1.0856, and the dollar rose 0.6% against Japan’s yen to ¥123.23.

http://www.wsj.com/articles/global-s...ent-1449221385