Dow closes up more than 350 points after strong jobs report

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Stocks gained about 2 percent Friday on increased certainty of divergent central bank policy, with a strong jobs report supporting a Fed hike in December and ECB President Draghi maintaining a dovish stance in a speech.

The Dow Jones industrial average closed 369 points higher after briefly gaining as much as 388 points.

The S&P 500 gained more than 2 percent, back into positive territory for the year after closing lower year to date Thursday. Telecommunications and financials led all sectors except energy higher in afternoon trade. The Nasdaq also gained more than 2 percent.

“The jobs data continues to be positive as we look to the upcoming Fed December (meeting). Draghi’s comments, certainly interesting and the market has taken a run with it,” said Myles Clouston, senior director of advisory services at Nasdaq.

“The initial reaction yesterday was, why didn’t you do more. … Today we seem to have calmed down,” he said.

Equities extended gains in early afternoon trade as European Central Bank President Mario Draghi said quantitative easing was unlimited. “There is no particular limit to how we can deploy any of our tools,” he said.

The U.S. dollar index briefly climbed about 1 percent to above 98.5, while the euro held below $1.09 in afternoon trade.

“It was the color he put on it,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman. “It was an echo of his ‘whatever it takes’ comment. I think the market said: ‘I get it.’ It’s a gradual incremental approach. This isn’t meant to be the final shot across the bow.”

U.S. stocks closed sharply lower Thursday after Draghi’s announcement the ECB would extend its bond-buying program to at least March 2017, without increasing the amount, fell short of market expectations for greater stimulus.

The euro surged to above $1.09 Thursday for its largest one-day gain against the dollar since March 2009. U.S. stocks closed sharply lower, as investors also weighed concerns the Fed would hike rates while the economy is too weak.

Stocks attempted to more than recover Thursday’s losses Friday, opening higher after encouraging employment data.

“The jobs report was very strong. Here you have parallel interests, Wall Street, the Fed and Main Street” being supported, said Brian Muench, vice president of investment management for Allianz Investment Management.

“I think they’ll raise once and they’re going to want to see the data support any future rate increases,” he said.

“The thing that’s really reassuring was construction was the number one sector of jobs growth,” said JJ Kinahan, chief strategist at TD Ameritrade.

“The other thing that was positive in the jobs report was hourly earnings were positive, too,” he said. “Crude has come back above the $40 level and that’s the danger, danger level.”

Traders also attributed some of Friday’s gains to recovery after Thursday’s sharp sell-off.

“We did, from a technical aspect, bounce off 2,045 at the end yesterday,” said John Caruso, senior market strategist at RJO Futures. “I don’t know if this is going to stick, this rally.”

U.S. stock index futures initially edged higher after the 8:30 a.m., ET, November employment report beat headline expectations with creation of 211,000 jobs and showed an increase in wages and continued 5 percent unemployment, as expected. The number of jobs created in October and September were also revised higher.

“It removes a lot of uncertainty. There’s just a relief of having more certainty. It’s sort of a converse to how stocks sold off in September (when the Fed didn’t raise rates). … The uncertainty now is going to come into play regarding what’s next, after Dec. 16. You might have a lot of debate around what they’ll do in January or March,” said Bryce Doty, senior fixed income manager with Sit Investment Associates.

The data is the last and most important release before the Federal Reserve could raise rates at its Dec. 15 and 16 meeting for the first time in nearly a decade.

“The Fed goes in December but the path is shallow and you couldn’t ask for anything more. It’s almost like the Fed did this report themselves, but I know they didn’t,” said John Canally, investment strategist and economist at LPL Financial.

Treasury yields traded mostly lower after briefly spiking on the jobs report. The 2-year yield was near 0.95 percent and the 10-year yield at 2.27 percent as of 3:14 p.m.

“I see the market saying to the Fed, ‘we have to be sure what we’re doing here. … There’s a lot going on right now between Draghi and the Fed raising rates and the potential for global political news, not to mention Russia and Turkey, so I think you’re going to see a bit of (volatility), and you’re going to throw another variable into that?'” said Alan Rechtschaffen, financial advisor and senior vice president at UBS Wealth Management Americas.

“I take the Federal Reserve at their word here because the pace is going to be relatively slow and continue to be data dependent. We may be looking at years before we see largely higher interest rates,” said Greg Woodard, portfolio strategist at Manning & Napier.

Separately, Philadelphia Fed President Patrick Harker said Friday he would prefer to start tightening sooner than later to keep the economy on track and to protect the central bank’s credibility. The comments were Harker’s first public comments on policy since he took the job in July.

After the initial rise on the jobs report, U.S. stock index futures turned lower in pre-market trade Friday as U.S. crude gave up gains to briefly fall more than 3 percent to below the psychologically key $40 a barrel level.

The decline came in just prior to the U.S. market open after sources said OPEC had agreed to roll over its policy of maintaining crude production in order to retain market share and raise its output ceiling.

Later in the day, OPEC President Emmanuel Ibe Kachikwu told CNBC the oil group decided to keep policy unchanged and wait to see future market fluctuations.

“Oil’s certainly going to be the story right now. That’s a massive move in WTI. … The untold part of this story is that headline reflects no new oil coming into the market,” said Art Hogan, chief market strategist at Wunderlich Securities. “OPEC actually saying what they’re doing.”

In morning trade, crude oil struggled to hold the $40 level, last off about 2.8 percent. Energy briefly fell more than 2 percent as the only decliner in the S&P 500.

In other economic news,the U.S. trade deficit widened unexpectedly by 3.4 percent to $43.9 billion in October as exports fell to a three-year low, suggesting that strong dollar pressure on trade could again weigh on economic growth in the fourth quarter.

The trade data pushed down Street expectations for growth. Economists in the CNBC /Moody’s survey lowered their tracking estimate for fourth-quarter GDP to 2.0 percent.

With Friday’s afternoon’s surge, the major U.S. averages tried to end the week flat or with slight gains.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 15.

About two stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 610 million and a composite volume of 3.2 billion in afternoon trade.

High-frequency trading accounted for 49 percent of December’s daily trading volume of about 7.5 billion shares, according to TABB Group. During the peak levels of high-frequency trading in 2009, about 61 percent of 9.8 billion of average daily shares traded were executed by high-frequency traders.

U.S. crude oil settled 2.7 percent lower at $39.97 a barrel. Gold futures settled up $22.90 to $1,084.10.

Evelyn Cheng

—Reuters contributed to this report.

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