U.S. stocks ended Wednesday's shortened trading session higher as encouraging news about the nation's job market outweighed concerns about Egypt's turmoil, higher oil prices and Europe's debt crisis.
The Dow Jones industrial index (^DJI) added 56 points, more than recouping Tuesday losses, to end at 14,988, while the broader S&P 500 (^GPSC) gained a point to 1,615 and the tech-heavy Nasdaq (^IXIC) rose 10 to 3,443.
Payroll processing firm ADP (ADP) said that U.S. employers added 188,000 jobs in June, more than the 155,000 forecast by economists, according to data provider FactSet. The government's weekly jobless claims report provided evidence that layoffs remain low and job gains steady. The number of Americans seeking unemployment benefits fell 5,000 to 343,000, the Labor Department said.
Another report showed that U.S. services firms grew at a slower pace in June from May but added more jobs.
Average U.S. rates on fixed mortgages eased this week after last week's surge, declines that could prompt homebuyers to act quickly before rates rise further. Mortgage-buyer Freddie Mac said the average on the 30-year loan dropped to 4.29%. That's down from 4.46% last week, the highest in two years and a full point more than a month ago.
Among stocks making moves Wednesday:
Alcoa (AA) fell 1.2%, to $7.71 after the Citigroup (C) analyst Brian Yu reduced his second-quarter and full-year profit predictions for the aluminum producer, citing low prices for the metal.
AutoNation (AN) gained 71 cents, or 1.6%, to $45.27 after Credit Suisse raised its rating on the stock to "outperform" from "neutral," citing a positive outlook for the company's parts and servicing business.
Yahoo (YHOO) rose 2.4% to $25.59 after the Internet company announced it was buying mobile-app maker Qwiki for a reported $50 million. The deal is Yahoo's third acquisition since May when it bought blogging service Tumblr for $1.1 billion in cash.
Boeing (BA) climbed more than 1% to $102.89 after news it delivered more planes than competitor Airbus in the first half of this year. The Chicago-based aerospace company has delivered 306 jetliners so far, including 17 787s. Boeing is playing catch-up with those deliveries because of the problems with the 787's battery earlier this year. It is aiming to deliver 60 of those planes this year.
Mead Johnson Nutrition (MJN) fell $6.05, or 8.1%, to $68.85 adding to Tuesday's 5.7 percent slump. The Chinese government is investigating the nutritional products maker for possibly violating anti-monopoly laws in its pricing of infant formula, Bloomberg News reported yesterday.
Shares of Honeywell International (HON) rose nearly 1% after federal regulators gave the company go-head to resume operations at a plant that helps make nuclear fuel, following a yearlong shutdown. The plant has been closed since May 2012 after the government ordered Honeywell to make the site able to withstand natural disasters.
On Friday, all eyes will be on the latest jobs numbers, due out from the Labor Department at 8:30 a.m. ET. The consensus view is that the report will show U.S. employers added 161,000 jobs in June and the nation's unemployment rate fell a tenth of a percentage point to 7.5%.
Compiled from staff and wire reports.
If You Only Know 5 Things About Investing, Make It These
Closing Bell: Stocks End Short Session Higher Ahead of July 4 Break
Warren Buffett is a great investor, but what makes him rich is that he's been a great investor for two thirds of a century. Of his current $60 billion net worth, $59.7 billion was added after his 50th birthday, and $57 billion came after his 60th. If Buffett started saving in his 30s and retired in his 60s, you would have never heard of him. His secret is time.
Most people don't start saving in meaningful amounts until a decade or two before retirement, which severely limits the power of compounding. That's unfortunate, and there's no way to fix it retroactively. It's a good reminder of how important it is to teach young people to start saving as soon as possible.
Future market returns will equal the dividend yield + earnings growth +/- change in the earnings multiple (valuations). That's really all there is to it.
The dividend yield we know: It's currently 2%. A reasonable guess of future earnings growth is 5% a year. What about the change in earnings multiples? That's totally unknowable.
Earnings multiples reflect people's feelings about the future. And there's just no way to know what people are going to think about the future in the future. How could you?
If someone said, "I think most people will be in a 10% better mood in the year 2023," we'd call them delusional. When someone does the same thing by projecting 10-year market returns, we call them analysts.
Someone who bought a low-cost S&P 500 index fund in 2003 earned a 97% return by the end of 2012. That's great! And they didn't need to know a thing about portfolio management, technical analysis, or suffer through a single segment of "The Lighting Round."
Meanwhile, the average equity market neutral fancy-pants hedge fund lost 4.7% of its value over the same period, according to data from Dow Jones Credit Suisse Hedge Fund Indices. The average long-short equity hedge fund produced a 96% total return -- still short of an index fund.
Investing is not like a computer: Simple and basic can be more powerful than complex and cutting-edge. And it's not like golf: The spectators have a pretty good chance of humbling the pros.
Most investors understand that stocks produce superior long-term returns, but at the cost of higher volatility. Yet every time -- every single time -- there's even a hint of volatility, the same cry is heard from the investing public: "What is going on?!"
Nine times out of ten, the correct answer is the same: Nothing is going on. This is just what stocks do.
Since 1900 the S&P 500 (^GSPC) has returned about 6% per year, but the average difference between any year's highest close and lowest close is 23%. Remember this the next time someone tries to explain why the market is up or down by a few percentage points. They are basically trying to explain why summer came after spring.
Someone once asked J.P. Morgan what the market will do. "It will fluctuate," he allegedly said. Truer words have never been spoken.
You need no experience, credentials, or even common sense to be a financial pundit. Sadly, the louder and more bombastic a pundit is, the more attention he'll receive, even though it makes him more likely to be wrong.
This is perhaps the most important theory in finance. Until it is understood you stand a high chance of being bamboozled and misled at every corner.