The Era of Good Feelings: Markets Rise on Optimism

The Nasdaq Composite rallied to an 11-year high on Friday, the Dow advanced 1.15 percent to 12,851 points, just shy of the 12,876 level reached in May 2008, and as stocks advanced, the S&P 500 extended the best start to a year since 1989.

So what did it?

Financial and industrial stocks led the way, with Bank of America (NYSE:BAC) rising 4.6 percent and Caterpillar (NYSE:CAT) climbing 2.4 percent.

Earnings were also a major force behind today’s rally, with Tyson Foods (NYSE:TSN) rallying 5.2 percent after reporting first-quarter revenue that topped expectations.

Genworth Financial (NYSE:GNW) enjoyed net investment gains rather than losses in the fourth quarter, boosting shares 14 percent and leading the S&P 500 higher, while Gilead Sciences (NASDAQ:GILD) rose 8.2 percent after reporting fourth-quarter earnings up 5.7 percent on growing product sales and smaller royalty payments.

Of course, markets couldn’t help but be effervescent today after the Labor Department lowered the U.S. unemployment rate by two-tenths of a point to 8.3 percent, the lowest it’s been since February 2009. January data showed nonfarm payrolls to have risen a whopping 243,000, wildly exceeding even the most optimistic of economists’ projections.

Meanwhile, the U.S. services sector was shown to have expanded at a faster rate in January on new orders. The Institute for Supply Management’s services index rose from a revised 53.0 in December to 56.8 last month, the highest level since February 2011.

The ISM’s employment index rose from 49.8 in December to 57.4 in January, the highest level in six years.

Even European markets found some respite today after receiving some encouraging economic data. The Stoxx Europe 600 rose 1.73 percent today to its highest level in six months after the euro-zone composite purchasing manager’s index confirmed private-sector activity had unexpectedly expanded in January, rising from 48.3 in December to 50.4.

Alcoa (NYSE:AA) rallied at least 2.5 percent, pacing gains among companies most tied to economic growth. The Dow Jones Transportation Average rallied upwards of 1 percent as FedEx (NYSE:FDX), considered to be an economic bellwether because it moves goods from pharmaceuticals to financial documents, climbed 1.2 percent.

The Morgan Stanley Cyclical Index climbed 2.6 percent amid economic optimism, while auto stocks were buoyed by the jobs report. General Motors (NYSE:GM) shares were up more than 7.5 percent in mid-day trading and Ford (NYSE:F) was up 3.4 percent.

And much like the Era of Good Feelings that saw the exaltation of victory at the end of the War of 1812 replace the bitter political divisions between Federalists and Republicans, the North and South, East coast societies and the settlers of the western frontier, so too has this week seen an inordinate amount of cooperation among disparate classes of people: Republicans and Democrats in Congress.

The Republican-led House of Representatives voted Wednesday night to extend President Obama’s pay freeze for lawmakers as well as congressional staffers and civilian federal employees, receiving bipartisan support for the measure that passed on a vote of 309 to 117.

Then on Thursday the Senate approved a bill aimed at preventing lawmakers from trading on information to which they are privy because of their positions as lawmakers. The Stop Trading on Congressional Knowledge (STOCK) Act was passed in a 96-3 vote.

Of course, the Era of Good feelings was short-lived, and this optimism will likely die out sooner than you can say “2012 elections,” but there is real evidence that the economy, at least the U.S. economy, is finally staging a long-awaited comeback, one that it seems not even Congress has been able to muck up.

To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com