August 5, 2016 / 6:47 PM / 2 years ago

US STOCKS-Wall St hits record on payrolls report lift

* 255,000 jobs added in July vs forecast 180,000

* S&P 500’s financial index trading at 2016 high

* Indexes up: Dow 0.9 pct, S&P 0.77 pct, Nasdaq 1.1 pct (Updates to late afternoon, changes byline)

By Chuck Mikolajczak

NEW YORK, Aug 5 (Reuters) - U.S. stocks were on track for their best day in a month on Friday, with the S&P 500 touching a record intraday high after a second straight month of robust labor market data heightened expectations for acceleration in economic growth.

The U.S. Labor Department report showed that nonfarm payrolls rose by 255,000 in July, far outpacing expectations for a gain of 180,000.

While the unemployment rate remained unchanged at 4.9 percent, it held below the 5 percent mark associated with full employment.

The S&P 500 reached 2,182.33, its ninth record intraday high since July, powered by a 1.8 percent gain in financials, which would be primed for profit increases should the Federal Reserve raise interest rates.

JPMorgan Chase shares gained 2.8 percent to $66.34 and the financial index reached its highest level of the year.

“The market loved it, it gives the impression at least that the Fed can have another data point to raise rates,” said JJ Kinahan chief market strategist at TD Ameritrade in Chicago.

“It just backs a lot of what everybody has sort of been hoping for and the biggest thing it did was it put to rest the May jobs report.”

Employment numbers were weak in April and May, and a surprisingly strong reading in June left investors unsure of the state of the economy. The June employment number was revised to 292,000 from 287,000.

The Fed may still wait for gross domestic product growth to improve and inflation to move closer to its 2 percent target before pulling the trigger on raising rates.

The chances of a rate hike doubled to 18 percent for September after the jobs report and rose to about 46 percent from 29.4 percent for December, according to CME Group’s FedWatch tool.

The Dow Jones industrial average rose 165.49 points, or 0.9 percent, to 18,517.54, the S&P 500 gained 16.63 points, or 0.77 percent, to 2,180.88 and the Nasdaq Composite added 56.65 points, or 1.1 percent, to 5,222.90.

Bristol-Myers plunged 15.9 percent after its lung cancer drug failed in a late-stage study while Merck, which makes a rival drug, rose 8 percent.

Bristol-Myers was the biggest drag on the S&P 500, while Merck gave the benchmark index its biggest boost.

Advancing issues outnumbered declining ones on the NYSE by a 2.67-to-1 ratio; on Nasdaq, a 2.86-to-1 ratio favored advancers.

The S&P 500 posted 29 new 52-week highs and no new lows; the Nasdaq Composite recorded 118 new highs and 20 new lows. (Reporting by Chuck Mikolajczak; Editing by Meredith Mazzilli)

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