Last updated: March 8, 2013 9:46 pm

S&P 500 edges closer to record high

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The main US benchmark inched closer to an all-time high this week as stocks were bolstered by stronger-than-expected labour market data that suggested the country’s economy was improving.

The S&P 500 climbed 2.2 per cent to 1,551.18 for the week, its best performance in two months. The benchmark – up 8.8 per cent from the start of 2013 – is within 1 per cent of its all-time record level of 1,565 which was reached in October 2007.

Investors were encouraged by the latest non-farm payrolls report released before the market opened on Friday, which beat consensus expectations and sent the unemployment rate down 0.2 percentage points to 7.7 per cent. The benchmark traded slightly higher just after midday in New York on Friday.

JJ Kinahan, chief derivatives strategist at TD Ameritrade, said the employment report helped confirm views among investors that the country’s labour market was gaining strength. Earlier in the week, a strong reading of private sector payrolls data and lower-than-expected first time jobless claims figure helped to fuel optimism.

“It reinforces the fact that it is not just the Federal Reserve’s monetary policies that are driving the market,” he said.

Meanwhile, the blue-chip heavy Dow Jones Industrial Average surpassed its all-time high level this week and rose 2.2 per cent to 14,397.07.

All 10 industry groups on the S&P 500 recorded gains for the five-day trading week, with financial sector stocks leading the way. The industry measure gained 3.4 per cent for the week and was led by insurance groups including Lincoln National , which rose 10.7 per cent to $33.00, and Genworth Financial , which advanced 15.6 per cent to $9.85.

Large financial institutions were also in focus this week as the Federal Reserve released preliminary results of its annual stress tests. Goldman Sachs shares were set back late in the week by its poor performance on the test. Shares in the large US investment bank still managed to gain 1.6 per cent for the week to $152.98. Similarly, shares in JPMorgan Chase were affected by its performance on the central bank’s stress-test results, but still advanced 2.6 per cent to $50.20.

Citigroup , which said it would buy back $1.2bn of its shares over the next 12 months following the stress test, was among the strongest stocks in the sector and climbed 10.9 per cent to $46.68.

US retailers also came into focus as several of the leading companies reported their sales figures for the month of February, which came in slightly ahead of forecasts. The consumer discretionary sector rallied 3.2 per cent for the week, boosted by retailers.

But the sector-wide gains did little to help shares in department store retailer JC Penney , which registered among the week’s worst-performing stocks.

Shares in the troubled company fell 14.6 per cent to $15.11 as it said on Friday that it would cut 2,200 jobs to reduce costs. The move came as one of its largest shareholders, Vornado Realty Trust , sold half its stake in the company earlier in the week. According to Bloomberg and Markit data, JC Penney’s shares are the second most-heavily shorted stock on the S&P 500.

Analysts questioned the company’s plans, which had included efforts to simplify its pricing model and refurbish its stores. “We are not convinced that JC Penney has a successful strategy,” said analysts at Bank of America. “Even if the strategy is the right one, we believe that the implementation may take longer than the company expects.”

The Nasdaq Composite index gained 2.4 per cent to 3,244.37. Shares in Apple , the heaviest weighted stock on the tech-focused Nasdaq index, were 0.3 per cent higher to $431.72 for the week. Facebook climbed 0.7 per cent to $27.96 as the social networking site unveiled a redesign of its popular website.

Pandora Media , the internet radio company, climbed 12.1 per cent to $13.79 as it said stronger advertising sales had boosted its revenues in its latest quarter. The company added that its chief executive would step down once a successor had been found.

Shares in Time Warner , the media and publishing company, gained 7.2 per cent to $57.46 as it announced plans to spin out its magazine unit by the end of the year.

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