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Stocks Surge After Jobs Report

Friday, 3 Aug 2012 | 4:01 PM ET

Stocks rallied to three-month highs, snapping a four-day losing streak, after today’s jobs report was better than anticipated but still left the door open to additional Federal Reserve measures to stoke growth. Markets also appeared more confident the European Central Bank will act to contain the euro zone debt crisis.

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The Dow Jones Industrial Average,S&P 500 and Nasdaq ended sharply higher, erasing losses for the week.

The Dow jumped 217.29 points, or 1.69 percent, to close at 13096.17, while the S&P 500 surged 25.99 points, or 1.90 percent, to end at 1390.99. The Nasdaq gained 58.13 points, or 2 percent, to finish the week at 2967.90.

For the week, the Dow rose 0.17 percent, the S&P added 0.36 percent and the Nasdaq advanced 0.33 percent.

Hewlett-Packard led the blue-chip gainers, while Verizon underperformed.

Financials, energy and industrials were the best performing S&P sectors.

U.S. oil futures topped $91 a barrel for the first time in two weeks, surging over 4 percent to post the biggest one-day gain for oil prices since June 29.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, ended below 16.

Several stocks hit multi-year highs, including Kraft, Gap, Target, Monsanto, Comcast, Cintas and CBS.

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Non-farm payrolls increased by a seasonally adjusted 163,000 jobs in July, after a downwardly revised 64,000 increase in June. The unemployment rate stood at 8.3 percent, up from 8.2 percent in June. This was the 42nd consecutive month of unemployment above 8 percent. Economists had been looking for the creation of about 100,000 new jobs in the month with the unemployment rate holding steady. July average hourly earnings increased 0.1 percent after a June increase of 0.3 percent. (Read More: Why Private Job Creation is Even Slower Than it Looks).

While job creation picked up, an uptick in the unemployment rate keeps the door open for the Federal Reserve to take additional action to further stimulate economic growth.

“The jobs report is not a game changer in terms of slow economic growth,” Peter Cardillo, chief market economist at Rockwell Global Capital, said. “It’s a relief for the markets and leaves the door open for more Fed help.”

The Institute for Supply Management’s July non-manufacturing indexcame in at 52.6 after a June reading of 52.1. A reading above 50 indicates expansion for the services sector.

Market participants also appeared to reconsider ECB chief Mario Draghi's approach to the euro-zone crisis after yesterday's sell off.

"Yesterday's announcement by ECB President Draghi initially did not appear to help calm fears in the region or build confidence," James Paulsen, chief investment strategist at Wells Capital Management, wrote in a note. "This morning, however, investors seem to be reassessing the forceful commentary as perhaps signaling a larger change in the approach to the euro zone challenges." (Related: Draghi's Master Plan to Save the Euro).

Trading in August: Better Than Usual?
August is generally one of the worst months of the year for stocks. Could this year be different? Jordan Kotick, Barclays Capital, and Tom Porcelli, RBC Capital Markets, discuss.

Knight Capital Group rebounded after the Wednesday software trading glitch that cost it $440 million. TD Ameritrade and Scottrade will resume tradingwith Knight, reversing their decision to abandon the company in the wake of the glitch.

In earnings news, Kraft Foods earned 68 cents per sharein the second quarter, two cents above estimates. While revenue fell short of expectations, the food producer left its full-year forecasts unchanged.

Dow component Procter & Gamble earned 82 cents per share for its fiscal fourth quarter, five cents above estimates. Revenue was light as sales and margins declined, however. P&G is forecasting a current quarter profit of 91 to 97 cents per share, below Street estimates. P&G also will repurchase $4 billion worth of its shares this fiscal year.

In the media space, Viacom earned 97 cents per share for the fiscal third quarter, three cents below estimates. Viacom cited weaker ad sales for the shortfall as well as a big drop in movie studio results.

CBS , meanwhile, reported a second-quarter profit of 65 cents per share, six cents above estimates, on strong results from its cable networks and an increase in profit margins.

Advertising giant Interpublic surged on speculation Publicis may be considering a bid.

Activision Blizzard beat estimates by eight centswith a second-quarter profit of 20 cents per share. The videogame producer raised its 2012 outlook, helped by strong sales of its new “Diablo III” game.

LinkedIn matched analyst estimates with earnings of 16 cents per share. Revenue beat forecasts, and the business social networking site raised its full-year outlook on better results from business and advertising services. (See Also: LinkedIn Shows Social Networks How It's Done).

In financials, AIG announced that the U.S. Treasury will launch an offering of $4.5 billionof its AIG common stock. AIG intends to buy up to $3 billion of the offering. Earlier, AIG earned $1.06 per sharefor the second quarter, well above analyst estimates of 57 cents per share on improvements at its insurance operations.

Japanese automaker Toyota Motor reported a rebound in productionand sales in North America and Japan, with a quarterly operating profit of 353 billion yen ($4.51 billion).

Coming Up Next Week:

MONDAY: Bernanke speaks; Earnings from Humana, Chesapeake Energy, Vornado, Boston Properties

TUESDAY: Bernanke speaks, consumer credit; Earnings from Disney, Cablevision, CVS Caremark, FirstEnergy, Marsh and McLennan, MGM Resorts, Fossil, Tenet Healthcare, Sirius XM Radio, Molson Coors, Priceline

WEDNESDAY: Weekly mortgage applications, productivity and costs, oil inventories; Earnings from News Corp., Liberty Media, Dean Foods, ING Group, Macy’s, Ralph Lauren, SodaStream, Rio Tinto, Computer Sciences, International Flavors and Fragrances

THURSDAY: Jobless claims, international trade, wholesale trade, natural gas inventories; Earnings from AMC Networks, Advanced Auto Parts, Kohl’s, Tim Hortons, DeVry, Windstream, Randgold Resources, Scotts Miracle-Gro

FRIDAY: Import/export prices, Treasury budget; Earnings from JC Penney, Brookfield Asset Management

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