SAN FRANCISCO (Reuters) – Facebook on Wednesday filed to raise $5 billion in an initial public offering. Here are a few highlights of its meteoric rise, several of which were chronicled in David Fincher's seminal Oscar-winning 2010 movie, "The Social Network":

October 28 2003 – Mark Zuckerberg, a Harvard psychology sophomore, writes "Facemash," a website that asked users to judge students' attractiveness based on their dorm-directory photos. The authorities — and many students — were not amused.

February 4 2004 – Zuckerberg launches Thefacebook.com, a social network that allows users to create basic profiles including personal information and photos.

February 10 2004 – Harvard students Cameron Winklevoss, Tyler Winklevoss and Divya Narenya send Zuckerberg a cease-and-desist letter, accusing Zuckerberg of independently developing thefacebook.com while he was hired to work on their social networking project, HarvardConnection.

June 2004 – Peter Thiel, PayPal co-founder and venture capitalist, invests $500,000 in Facebook.

May 26, 2005 – Accel Partners, the venture capital firm headed by investor Jim Breyer, invests $12.7 million in Facebook, valuing the company at roughly $100 million.

October 24, 2007 – Microsoft Corp announces that it purchased a 1.6 percent share of Facebook for $240 million, giving the company a total implied value of around $15 billion.

April 7, 2008 – Facebook settles with the founders of "ConnectU", the Winklevoss twins and Divya Narendra, for a purported $65 million, according to promotional material later published by ConnectU's lawyers.

May 26, 2009 – Russian investor Yuri Milner's Digital Sky Technologies invests $200 million for a 1.96 percent stake, bringing Facebook's value down to $10 billion.

June 3, 2010 – Zuckerberg sweats profusely as he takes questions about Facebook's privacy policy while onstage at the All Things Digital conference. The episode, which the Twittering classes dubbed a "Nixon Moment," renewed questions about Zuckerberg's viability as the CEO of a company rumored to go public soon.

June 30, 2010 – In one of the more bizarre twists in Facebook's history, New York businessman Paul D. Ceglia files suit against Zuckerberg, claiming he had struck a deal with the founder in 2003 for half of Facebook's revenue and rightfully owned 84 percent of the company. Three successive lawyers withdrew from his legal team within a period of four months in late 2011. The litigation remains ongoing.

October 10, 2010 – Columbia Pictures releases "The Social Network," a film about Facebook's beginning, directed by David Fincher and written by Aaron Sorkin.

January 2, 2011 – Facebook raises $500 million from Goldman Sachs and Digital Sky Technologies in a deal that valued the company at $50 billion.

January 2011 – Goldman controversially markets as much as $1.5 billion worth of Facebook shares to its private investors, but withdraws the offer from American clients on January 18 following intense media coverage and scrutiny from the U.S. Securities and Exchange Commission. The offer was withdrawn because of accusations that it ran afoul of regulations prohibiting share-placement sponsors from aggressively promoting a deal to potential investors.

November 29, 2011 – Facebook agrees to settle Federal Trade Commission charges that it deceived users on what information it would keep private. The incident underscored how user concerns about privacy were spurring top-level government scrutiny of Silicon Valley.

January 25, 2012 – Trading of Facebook shares is halted on the secondary market as rumors of an impending IPO gain steam.

February 1, 2012 – Facebook files its Form S-1 with the Securities and Exchange Commission seeking to raise $5 billion in a highly anticipated IPO.

(Reporting by Gerry Shih)

NEW YORK – The New York Stock Exchange and German exchange Deutsche Boerse called off their planned merger Thursday, a day after the European Union said it would block the union because of concerns about a monopoly.

The two exchanges announced in February 2011 that they would merge in a $10 billion deal. But the European Commission, the EU’s executive body, said the combined company would control 90 percent of the trading of some financial products in Europe.

The European decision was a blow to the combined dreams of Deutsche Boerse AG and NYSE Euronext, the NYSE’s parent company. They had hoped to compete better with other large exchanges in the U.S. and Asia.

In the U.S., the planned merger made waves because it would have meant foreign control of the storied trading floor at 11 Wall St. in New York. Despite political opposition to the deal, it got the green light from regulators in the U.S.

In Europe, however, the regulatory discussions revolved around control.

Some hoped the deal would boost Frankfurt’s status as a financial center that would compete with New York, Hong Kong and London. But regulators worried that it would create a financial behemoth.

The timing of the deal also played a role. Regulators are under great pressure to increase oversight of the financial sector as Europe tries to resolve the huge debt loads of its countries. Adding a complex institution would add to the regulatory burden.

The commission said it would block the deal because the combined company’s dominance of the market would have made it almost impossible for competitors to offer rival trading systems.

CAIRO – Egypt’s benchmark stock index fell over 2 percent Thursday, paring an earlier plunge stemming from deadly soccer riots the night before that left 74 dead and rekindled fears of fresh instability akin to the unrest that has battered the country and its economy in the year since the ouster of Hosni Mubarak.

The benchmark EGX30 index shot down about 4.6 percent within minutes of the start of trade, but rebounded as bargain hunters stepped in. The index closed down 2.2 percent, at 4,584 points.

The declines halted a rally in the market over the past week that had been fueled by newfound optimism after the peaceful passing of the one year anniversary of the Jan. 25 uprising that pushed Mubarak from power. Investors had also found cause to cheer in the convening of the country’s first post-Mubarak parliament — a legislature that was seated after Egypt’s freest elections in decades.

But the riots by football fans late Wednesday in the Mediterranean city of Port Said reignited simmering criticism of the country’s military rulers, with witnesses saying the police stood idly by while the violence broke out after the match. Parliament convened an emergency session — a move also mirrored by the Cabinet.

“There are a lot of fears, a lot of concerns, a lot of potential clashes,” said Mustafa Abdel-Aziz, senior broker with Mideast investment bank Beltone Financial’s brokerage division. “But we’re seeing the market react much better than it should” given the night’s violence.

Abdel-Aziz said that the early sell-off triggered buying interest, with investors stepping in to snap up deals.

In a market that ended 2011 over 45 percent below its level at the end of 2010, the recent gains have offered a measure of optimism as the country pushes ahead with a rocky transition to democracy that has been defined by continued protests and a growing mistrust of a military that had been hailed at the start of the uprising as heroes.

The violence in Port Said, however, reflected how fragile the gains could be at a time when Egypt’s economy is reeling from the overall effect of the uprising. The protests and associated violence have hammered the country’s chief foreign currency sources — foreign investment and tourism.

Meanwhile, Egypt’s net international reserves were down 50 percent year-on-year by the end of December, leaving wide open questions about how the country will raise new cash to bridge a widening deficit and worries over the balance of payments. It is now discussing with the International Monetary Fund a $3.2 billion loan.

The Finance Ministry on Wednesday said it would secure $1.1 billion in aid from the European Union and the World Bank. While Egyptian media have reported the loans appear to be a done deal, an EU financial official in Cairo told The Associated Press that the EU portion of the aid — known as Macro-financial Assistance — was predicated on Egypt securing the IMF loan.

An EU team was scheduled to come to Cairo on Feb. 22 for discussions, the official said, speaking on condition of anonymity because he was not authorized to discuss the issue.

The World Bank said Thursday that Egypt had asked for $1 billion in aid and that discussions would begin with the government on the request.

Separately, the Egyptian Central Bank held its benchmark interest rate unchanged, in a move London-based Capital Economics said appeared to reflect the government’s confidence in securing the IMF loan.

But Capital Economics said in a research note that while there have been indications that investors are more optimistic, the country continues to face risks from devaluation pressure on the pound and continued political instability.

For investors, the macroeconomic concerns appear to have been factored into their investment strategy, said brokers.

But what’s “not quantifiable is the extended tension between the police, the protesters and the army,” said Abdel-Aziz. “Definitely, if there’s an extended tension in this relationship, you could see another wave of selling.”

NEW YORK – When Facebook goes public in a few months, will its stock appear on the New York Stock Exchange or the Nasdaq? Depends what its billionaire founder prefers for a backdrop — a trading floor on Wall Street or towering video screens in Times Square.

“Basically, it depends on where Mark Zuckerberg wants to get his picture taken,” says Larry Tabb, the founder of the Tabb Group, a market research and advisory company.

Beyond that, it doesn’t matter much. When a company signs up with the Nasdaq, its stock still trades on the NYSE, and NYSE-listed companies trade on the Nasdaq. In fact, more NYSE-listed stocks trade on the Nasdaq than on their home exchange, according to the Nasdaq.

The obvious difference between the two is image.

Nasdaq still has the upstart reputation. The home of Apple, Amazon.com and Google came of age in the late 1990s, when day traders banked on dot-com stocks turning them into millionaires overnight.

The NYSE is the stately symbol of the financial markets at Wall and Broad streets. The exchange dates to 1792, when 24 brokers and merchants gathered to trade stocks under a sycamore tree near its present home.

Its origins can be traced back even further. Dutch merchants set up trading posts near the wooden wall built to protect New Amsterdam from outsiders and established the area as a hub of trading in furs, food and slaves.

These days, though, the din of traders yelling to each other across the trading floor has mostly been replaced with the hum of computers. The floor serves mainly as a television backdrop.

Even if there’s little difference between the two exchanges, the stereotypes still seem to matter for companies going public. The three largest initial public offerings of last year and the 10 largest of all time debuted on the NYSE.

Young technology companies with quirky names still flock to the Nasdaq. Last year, the exchange signed up Zynga, maker of the games FarmVille and Words With Friends, and Yandex, an Russian Internet search provider. LinkedIn and Pandora picked the NYSE.

NYSE charges a company more up front, and its fees are mostly based on how many shares a company has trading. The initial fee runs $125,000 to $250,000. After that, annual fees range from $38,000 to as much as $500,000.

A Nasdaq listing runs $35,000 to $99,500 each year, with no separate fee for signing up. Facebook will have no problem affording either: It plans to raise $5 billion in its IPO — an amount, incidentally, that wouldn’t put it in the top 10 all-time for NYSE.

For the money, both exchanges offer similar benefits. They try to raise a company’s profile through arranging conferences, lining up meetings with investors and analysts and running advertisements.

As for promotion, Nasdaq claims its MarketSite Tower next to Times Square is the world’s largest stationary video screen, at seven stories high. A company that lists on the Nasdaq gets access to the tower, says Joseph Christinat, a spokesman for Nasdaq OMX.

“We can blast the entire bottom of Times Square with a company’s logo,” he said.

Then again, with more than one in 10 people on the planet logging on to update their status, post photos and find old friends, Facebook has little trouble getting people’s attention.

Because stocks can be traded on either exchange, both NYSE and Nasdaq are bound to benefit from Facebook’s debut, Tabb says.

NYSE Euronext, the parent company of the NYSE, makes roughly three-hundredths of a penny for every order of 100 stocks. More stock of a popular company translates into more fees.

Tabb estimates Facebook’s stock could yield $500,000 to $1 million in trading fees each year, divvied up among the exchanges.

Picking an exchange doesn’t even make a difference anymore in a company’s stock ticker symbol. NYSE tickers used to have one, two or three letters, Nasdaq four or five. New rules allow either exchange to use up to five. Facebook has opted for two — FB.

To an investor buying a stock, there’s little reason to care where a decent-sized company is listed. Maybe 20 years ago it made more of a difference, says Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

Back then, a company listed on the NYSE had a specialist on the floor of the exchange who kept an inventory of its stock. That inventory ensured there were shares available to buy and sell.

Nowadays, electronic trading makes it easier to match buyers and sellers. It also keeps transaction costs low. Most orders travel through a dozen or more computerized exchanges scattered across the country, each competing for transactions by offering faster execution.

“I don’t see how one market is different from another these days,” Ablin says. “Facebook could friend either market, and it would be pretty much the same for us.”

LONDON (Reuters) – Caution ahead of U.S. jobs numbers kept a lid on gains for stock markets on Friday after an optimistic start to the year that has added more than 7 percent to global company values.

Sentiment was underpinned by data that hinted the euro zone may yet avoid recession, boosting European shares, and that China has room to ease monetary policy.

The U.S. nonfarm payrolls report will be a key catalyst as strong data would fuel growing hopes the global economy is on a firm recovery path, while disappointing numbers could add to pressure on the U.S. Federal Reserve to stimulate the economy, supporting appetite for riskier assets.

"A weak read will probably be interpreted as an indication that QE3 (a third round of quantitative easing) is needed to help the recovery," Cameron Peacock, market analyst at IG Markets, said.

Payrolls are forecast to rise by 150,000 after a 200,000 increase in December, with the unemployment rate seen static at 8.5 percent.

Tensions ahead of the data kept the dollar teetering near three-month lows versus the yen on Friday, trading at 76.19 yen and keeping alive the threat of official intervention from Tokyo to weaken the Japanese currency.

"The pressure has really been on the dollar after the FOMC meeting," said John Hardy, currency strategist at Saxo Bank.

"I think the will of the Japanese will be tested in coming days, but we're up against a hard wall with all the determination and the artillery the Japanese have."

Signs of life in a moribund euro zone came from a business survey showing the private sector economy snapped a four-month decline in January and expanded, albeit very weakly and roughly in line with earlier flash estimates.

Markit's Eurozone Composite Purchasing Managers Index (PMI) rose in January to 50.4 from 48.3 in December, above the 50 mark that denotes growth for the first time since August.

The FTSEurofirst 300 index (.FTEU3) of top European shares turned positive after the data, rising 0.2 percent.

The MSCI world equity index, which despite the euro zone debt crisis is up nearly 7.4 percent this year, was unchanged at 321.86.

But events in Greece, which is striving to seal a broader restructuring deal with its creditors by early next week, were likely to keep prices vulnerable intra-day.

The remaining risks that that process could still end up in a messy default that would have repercussions for banks and governments across Europe, supported demand for safe-haven government debt, with the German Bund future up 41 ticks higher at 139.49.

"The focus is squarely on the U.S. employment report which is crucial for near-term sentiment not just for the U.S. but in other markets as well," " Nick Stamenkovic, bond strategist, RIA Capital Markets, said

"On top of that, investors (are) still awaiting news from the Greek PSI negotiations which seem to be dragging on."

GREEK DEADLINE LOOMS

Euro zone finance ministers aim to approve a key second financing package for Greece on Monday, including agreement on the size of voluntary losses private bondholders are willing to accept and new reforms Athens must undertake.

Finance Minister Evangelos Venizelos said on Thursday the European Central Bank needed to share the restructuring burden.

It could send Athens profits from Greek bonds it holds via a roundabout route that would provide aid while respecting a ban on the ECB financing governments direct, sources said.

Investors were also on watch for possible monetary easing in China after its Purchasing Managers Index for non-manufacturing sectors dipped to 52.9 in January from 56.0 in December and input price inflation eased.

"With inflation on track to ease further, …policymakers still have ample room for more …easing measures to ensure a soft-landing," Qu Hongbin, chief economist for China and co-head of Asian economic research at HSBC, said.

The euro inched up to $1.3166, struggling to make much headway after the Chinese data.

Shares in commodities trader Glencore (GLEN.L) shed 1 percent and Xstrata (XTA.L) was down 0.7 percent.

They held on to the bulk of steep gains posted on Thursday on news the commodities trader is in talks to buy the mining group in all-share tie-up that could create a combined group worth more than 50 billion pounds ($79 billion), shaking up the industry with its biggest deal to date.

(Additional reporting by Brian Gorman, Neal Armstrong and Ana Nicolai da Costa; editing by Patrick Graham)

FRANKFURT (Reuters) – Deutsche Boerse's (DB1Gn.DE) chief executive Reto Francioni should step down following the collapse of its $7.4 billion plan to merge with NYSE Euronext (NYX.N), a member of the German exchange operator's supervisory board told a newspaper.

"The question needs to be asked whether there have to be consequences (for management)," Johannes Witt, a board member representing the interests of labour, told German weekly Euro am Sonntag in comments published on Saturday.

"Can someone who wanted to change the status quo by finding a partner only to see that (deal) collapse still lead this company into the future?"

Francioni's term ends in December, and contract extensions for CEOs in Germany are often agreed about a year in advance.

On Thursday, Boerse and NYSE terminated their merger plans after the European Commission blocked the deal to prevent handing the combined group a "near monopoly.

Boerse's labour leaders had undermined its campaign to convince German regulators a deal strengthened Frankfurt's role as a financial centre when they urged shareholders to reject the deal, fearing key responsibilities would be moved to New York.

Separately, Deutsche Bank's German retail asset management unit DWS called for a fresh start at the exchange operator in comments published by business weekly WirtschaftsWoche on Saturday.

"The merger tied up management capacity for more than a year. In the past couple of years, Boerse has stagnated, and now more dynamism needs to return," said Henning Gebhardt, head of European equities at DWS.

"Now and then there needs to be a fresh start – whatever form that might take (…) Francioni, of all people, does not come out of this without a scratch," Gebhardt told the magazine.

The fund manager said he was also unsatisfied with Boerse's development in overseas markets.

"Asia is where it's at. That's where to go for a piece of the action. I'm starting to suspect that the Boerse is not always the preferred partner there," he said.

"The company must listen more closely to what its customers want, since they are looking for alternatives and are migrating to new platforms like Chi-X or Bats," Gebhardt continued.

Boerse Chairman Manfred Gentz has rejected the idea of any immediate consequences for the Boerse due to the collapse of the NYSE merger, however, calling instead for calm and continuity.

(Reporting by Christiaan Hetzner, additional reporting by Andreas Kroener)

LONDON – Stocks spiked sharply higher on Friday after forecast-busting U.S. jobs figures reinforced hopes that the recovery in the world’s largest economy is gathering pace at a time when other regions, notably Europe, may be heading back into recession.

Figures from the Labor Department showed that employers in the U.S. added 243,000 jobs in January. As well as being the highest in nine months, the gain was around 100,000 more than anticipated.

The advance also contributed to a fifth straight fall in the U.S. unemployment rate. At 8.3 percent, it’s the lowest in three years.

The January jobs report was filled with other encouraging data and revisions. Hiring was widespread across many high-paying industries and pay increased, too.

“In terms of the broader outlook, one report does not a trend make but there is little doubt that U.S. economic data continues to surprise on the upside,” said Dan Greenhaus, chief global strategist at BTIG.

“We’ll have to wait until February’s report to see if this continues but for now, the risk rally is clearly on and from an economic perspective, it is most certainly warranted,” Greenhaus added.

In Europe, the FTSE 100 index of leading British shares was up 1.4 percent at 5,875 while Germany’s DAX rose 1.3 percent to 6,743. The CAC-40 in France was 0.8 percent higher at 3,405.

In the U.S., the Dow Jones industrial average was up 0.9 percent at 12,819 while the broader Standard & Poor’s 500 index rose 1 percent to 1,338.

The dollar also garnered some strength from the jobs figures as traders scaled back their expectations that the Federal Reserve would be pumping more money into the economy, evidenced also by a fall in Treasuries. The euro was trading 0.3 percent lower at $1.3097 while the dollar was 0.6 percent higher at 76.61 yen.

Andrew Wilkinson, chief economic strategist at Miller Tabak & Co., said the Fed would need more evidence before it is comfortable about the durability of the U.S. recovery, especially with the housing market still in a fragile state.

“It will take a series of repeat reports like today’s to deliver meaningful improvements to the unemployment rate before the Fed will feel confident that any improvement in employment prospects will replace the need for it to massage yields lower,” Wilkinson said.

Market sentiment has been fairly upbeat so far in 2012, partly on the back of a run of fairly strong U.S. economic data, which has convinced investors that the U.S. economy is over its soft patch from last summer.

The state of the U.S. economy contrasts with that of Europe, which appears headed for recession.

Official figures showed retail sales in the 17-nation eurozone dropped 0.4 percent during December, in contrast to expectations for an increase of the same amount.The data reinforced expectations that the eurozone contracted during the fourth quarter of the year. Eurostat is due to publish its first estimate for the quarter on Feb. 15.

The focus on the U.S. has proved a welcome diversion for some traders from monitoring the daily grind of Europe’s debt crisis, where much hinges on whether Greece can secure a deal with its private creditors, as is anticipated. A deal is expected soon, though that has been the official line for a few weeks.

Earlier in Asia, the picture was mixed.

Japan’s Nikkei 225 index fell 0.5 percent to close at 8,831.93 but Hong Kong’s Hang Seng ended marginally higher at 20,756.98.

Mainland Chinese shares extended gains fueled by news of fresh support for the farming and small-business sectors, with the benchmark Shanghai Composite Index rising 0.8 percent to 2,330.41 while the Shenzhen Composite Index added 1.5 percent to 878.29.

Oil markets were relatively subdued. Benchmark oil for March delivery was up 39 cents at $96.75 per barrel in electronic trading on the New York Mercantile Exchange.

____

Pamela Sampson in Bangkok contributed to this report.

NEW YORK (Reuters) – Stock-picking once again matters on Wall Street.

After a year in which stocks moved in near-lockstep regardless of individual merit, the herd mentality is crumbling away.

The move away from a frenzied rush in and then back out of the market is a welcome sign for stressed-out fund managers and lay investors alike.

"If I think something looks cheap I'm more prepared to own it because I think that will matter. Before, I would throw up my hands and say, 'So what? If it's perceived as a higher risk asset then it's going to crater with any nasty news out of Europe,'" said Art Steinmetz, chief investment officer at OppenheimerFunds in New York.

The change reaffirms the diversification strategies that underpin trillions of dollars worth of savings meant for college tuition and retirement. When just about everything is moving in the same direction, investors have fewer ways to cushion market swoons.

In 2011, daily activity in individual stocks was less dependent on company reports than on action in European government debt markets, and the equity, currency and commodities markets traded in tandem.

Now that stocks are going their own way, it's been good for so-called active fund managers, those who decide what individual stocks are best to hold rather than follow an index.

In January, about 70 percent of active managers outperformed the S&P 500, compared with just 23 percent in 2011, according to Bank of America/Merrill Lynch data.

"Our traders have had their best month since 2009 because of the fall-off in correlation," said Don Bright, a director and trader at Bright Trading in Chicago. "We're doing a lot of homework on earnings since fundamentals are driving individual stocks again."

BREAKING AWAY

Correlations, a measure of how tight a relationship individual securities or entire markets have with each other, have fallen sharply since the volatile trading days of last summer, according to Marko Kolanovic, head of equity derivatives at JPMorgan Chase & Co.

"We are currently witnessing the largest drop in realized correlation in the recent history of the U.S. stock market," he wrote in a recent note to clients. The rolling 10-day correlation of S&P 500 stocks had reached 80 percent in the fourth quarter of 2011, and fell to around 10 percent in early January, according to the bank.

Rob McIver, co-portfolio manager for the $3.8 billion Jensen Quality Growth fund (JENSX), said he grew increasingly frustrated over the second half of last year as he watched the companies in his portfolio increase earnings and yet suffer with the broad stock market.

McIver finished the year with a loss of 1 percent after dividends, compared with a 2 percent gain for the S&P 500.

One of his holdings was Emerson Electric (EMR.N), which sagged throughout the spring and summer as the euro zone crisis worsened. Strong second-quarter results didn't interrupt the trend.

"Emerson was almost like the canary in the coal mine," he said. The stock lost 18 percent in 2011; it is up more than 12 percent so far this year.

ALL IN VS. ALL OUT

For their part, individual investors aren't yet convinced. Despite a 4.3 percent increase in the S&P 500 in January – the second-best month since the end of 2010 – trading volume is down 15 percent from a year ago.

Volatile, correlated trading amplifies the post-flash crash suspicions of many retail investors who see markets as the playthings of big money with the resources to hire legions of PhDs and use expensive technology to keep up with high-speed trading.

Cliff Downing, 53, a small business owner in Wilburton, Oklahoma and a stock picker since the age of 10, has sold most of his stocks and closed out his brokerage accounts since 2008.

"On top of working in the major markets I used to like the (over-the-counter) Pink Sheets but I don't do any of it anymore. I've liquidated everything and moved things to other places," he said.

Since the financial crisis began to get a grip at the start of 2008, investors have pulled more than $400 billion from U.S. equity funds, and the figure keeps growing, with $7 billion withdrawn so far this year, according to the Investment Company Institute.

"Prior to the financial crisis, it was easy to have the view that you could focus more on the micro and individual companies and be fine," said John Roth, the manager of the $6.5 billion Fidelity Mid-Cap Stock fund (FMCSX) and the $1.8 billion Fidelity New Millennium Fund (FMILX). "But the last four years have shook the system."

For now, those worries have abated, and stockpickers are in a position to thrive if Europe's debt talks proceed and U.S. economic figures continue to improve.

"The market is starting to trade stocks based on underlying fundamentals," said Sudhir Nanda, portfolio manager of the $189 million T. Rowe Price Diversified Small Cap Growth fund (PRDSX).

"Autos and the auto sector were improving all the time last year, but the stocks were getting punished because people were so worried about risk," said Nanda. His fund has positions in auto suppliers TRW Automotive (TRW.N) and Tenneco (TEN.N), which were both hit hard in 2011 on global economic concerns.

So far, 2012 has been better for them. TRW and Tenneco are both up 24 percent after losing 38 percent and 27 percent in 2011.

STILL UNRESOLVED

Some analysts caution that the return to profitable stock-picking could be short-lived.

"The sense of real panic about some kind of meltdown in Europe has abated," said Jonathan Golub, chief U.S. equity strategist at UBS. "But I think at the end of the day that this is going to be another year where the macro is going to matter."

Fund managers looking to distinguish themselves from others now have to contend with this quarter's earnings trends, which show a lot of companies suffering declining revenue and a reduced number of companies beating earnings forecasts.

Derivatives strategists at JPMorgan Chase note that implied correlation – expectations for how tight the relationships between stocks will be in coming months – has only declined modestly.

That suggests investors are still hedging against a flare-up of troubles, likely from Europe.

"The European crisis, which is by no means resolved, is a pot that is at least not boiling at this point. It's a pot that's simmering," said OppenheimerFunds' Steinmetz. "That fear of transmission through the banks was what was keeping risky markets highly correlated. Now we can get back to fundamentals."

(Reporting By David Randall, Edward Krudy and Ryan Vlastelica; Additional reporting by Doris Frankel in Chicago; Editing by Martin Howell)

NEW YORK (Reuters) – A surge in hiring in the world's largest economy last month drove the Nasdaq to an 11-year high on Friday as optimism grew that the labor market is on a steady path to recovery.

The broad-based gains on solid trading volume also sent the Dow Jones industrial average near a four-year high. The S&P 500 extended its 2012 advance to about 7 percent and was at its highest level in more than six months.

The U.S. economy created jobs at the fastest pace in nine months in January and the unemployment rate dropped to nearly a three-year low of 8.3 percent, the government said.

"It is really hard to find something not to like in the jobs report," said Andrew Goldberg, market strategist at JP Morgan Funds in New York. "There is genuine strength in this report with broad-based jobs creation."

While the news was positive, it will take more months of substantial job gains to maintain momentum in a market that has risen more than 25 percent since October lows.

"There is no doubt that no matter how good this report is, this is still a lukewarm jobs recovery," Goldberg said. "There is a long way to go for this economy."

More than 450 stocks across all sectors hit 52-week highs, including Apple (AAPL.O), United Parcel Service (UPS.N), Yum Brands (YUM.N) and MasterCard (MA.N). The number of NYSE stocks making new 52-week highs was at it highest since July.

Wayne Kaufman, chief market analyst at John Thomas Financial in New York, said he was having a hard time identifying stocks that did not show signs of being overextended.

"Seventy four percent of stocks are over their own 200-day moving average. Those are bull-market statistics," he said.

Consumer discretionary shares and other stocks tied to an expanding economy led gains. Financial shares (.GSPF) rose 2.7 percent, while industrials (.GSPI) and discretionaries (.GSPD) added 1.7 percent to 2 percent.

In another report signaling strength, the pace of growth in the services sector unexpectedly accelerated in January to its highest level in nearly a year.

The Dow Jones industrial average (.DJI) gained 156.82 points, or 1.23 percent, to 12,862.23. The Standard & Poor's 500 Index (.SPX) rose 19.36 points, or 1.46 percent, to 1,344.90. The Nasdaq Composite Index (.IXIC) added 45.98 points, or 1.61 percent, to 2,905.66.

Signs of an improving economy and an absence of bad news from Europe have helped Wall Street stocks rally since last year. But analysts caution that the market is still susceptible to risks such as a flare-up in Europe's debt crisis or geo-political uncertainty in the Middle East that could generate an oil price shock.

For the week the S&P ended up 2.2 percent for its fifth week of gains in a row. The Dow rose 1.6 percent and the Nasdaq also advanced for a fifth straight week, up 3.2 percent for the best week since early December.

The S&P Small Cap 600 (.SML) hit an all time high.

Nonfarm payrolls jumped 243,000, the Labor Department said, as factory jobs grew by the most in a year. The jobless rate fell to 8.3 percent – the lowest since February 2009 – from 8.5 percent in December.

"The real stimulant to future economic growth is the 'boost in confidence' this report provides to the roughly 92 percent of the work force which already has a job," said Jim Paulsen, chief investment strategist at Wells Capital Management in a research note.

Four stocks rose for each one that fell on both the Nasdaq and NYSE. Volume on the NYSE, Amex, and Nasdaq was 8.03 billion shares, more than the daily 200-day moving average of 7.75 billion.

More than half way through the earnings season, 60 percent of S&P 500 companies that have reported have beaten expectations

according to Thomson Reuters I/B/E/S data.

Gilead Sciences (GILD.O) was one of the top gainers on the S&P 500, up 10.9 percent to $54.69 a day after announcing promising early results from a trial of a hepatitis C drug. It also posted adjusted fourth-quarter profit below consensus.

(Reporting by Edward Krudy; Editing by Kenneth Barry)

WASHINGTON – Underperforming money managers are losing their most reliable scapegoat.

Since the 2008 financial crisis, the nation’s professional stock-pickers — who manage billions for pension funds, endowments and wealthy families — have said stocks were too stuck-together to build smart, market-beating portfolios.

When stocks are rising and falling in unison based on the same big-picture economic news, with little regard for the companies behind them, it’s tough to beat the market.

That’s no longer a problem for the 2,000 relatively small companies in the Russell 2000 index. Correlation among Russell 2000 stocks, as measured by data analysts at Credit Suisse, plunged to 20 percent in late January, from 74 percent in September.

Meanwhile, the Russell has been on a historic upswing, gaining more than 36 percent in the past four months, compared with 22 percent for the much-bigger companies in the Standard & Poor’s 500 index.

Last month, the mighty Russell rose 7 percent — 60 percent better than the S&P 500, and its strongest January since 2006. The median market value of a Russell 2000 company is $563 million — about one-twentieth the median size of S&P 500 companies.

It should be a small-stock-picker’s paradise. Yet only 42 percent of the small-cap funds tracked by Credit Suisse are beating the market so far this year, compared with half of S&P 500 funds.

“This should have been a period when stock-pickers should have done well, and unfortunately, it just didn’t happen,” says Lori Calvasina, the lead author of the Credit Suisse report. “It does feel like this was an opportunity that got missed.”

So how did so many fund managers end up holding the wrong stocks? They were too cautious, Calvasina says.

Late last year, many were afraid that Europe’s debt crisis would boil over, threatening the U.S.’s slow economic recovery. They set about buying “high-quality” stocks — bigger companies, often in industries that do well when the economy is weak. Traders also bid up stocks of companies that do most of their business here in the U.S., Calvasina says.

Those aren’t the stocks driving the Russell index’s gains. As the economic outlook has improved this winter and traders have grown less worried about Europe, stocks have gained the most in sectors that are sensitive to the economy, such as homebuilders, boatmakers and furniture manufacturers.

“Plain and simple, (fund managers are) just not positioned for this,” Calvasina says. “The portfolios that most small-cap fund managers have built are positioned to outperform in pullbacks, not to dominate in rallies.”

One investment adviser who gave in to last fall’s economic worries is Don Olmstead, managing director of Novare Capital in Charlotte, N.C. Olmstead sold his clients’ small-cap stocks in September because the market was volatile and it looked like a financial shock from Europe might push the U.S. into a double-dip recession.

“If we were going into a slower-growth type of an economy, small-cap was not a place to be in our clients’ portfolios,” says Olmstead, whose company invests about $500 million on behalf of families, trusts, foundations and corporations.

Olmstead’s was the correct call for many investors. Small-company stocks are inherently risky, and they fall faster when the economy hits a snag. Even when his company is confident enough to endorse small-cap stocks, Olmstead says, portfolio managers still assess whether they’re a smart choice for a given client’s account.

Investors seeking a little more risk in their financial lives still have time to join the small-cap rally, says Sam Stovall, chief equity strategist at S&P’s Capital IQ, a data and research company.

One reason: Russell 2000 stocks fell further during last year’s selloff, so they have further to climb. The Russell 2000 skidded 30 percent between its April 29 high and its Oct. 3 low last year, compared with 19 percent for the S&P 500 and 17 percent for the Dow Jones industrial average.

After last year’s losses, investors should ask what investments typically do well in the first year of a new bull market, Stovall says. “The answer is, stocks over bonds, small-caps over large-caps,” he says.

Stovall said last year’s sell-off amounted to a “mini-bear market” because the major indexes declined less than the 20 percent typically that defines a bear market. The market has experienced eight such baby-bear corrections since World War II. Each time, stocks were sharply higher three, six and 12 months later.

“For four months of pain, you get an average of 12 months of pleasure, and right now, we’re four months into the 12,” Stovall says.

But this year’s small-cap gains aren’t merely a normal rebound from last year’s overselling, says Doug Roberts, chief investment strategist with Channel Capital Research. He says they’re also a result of the Federal Reserve’s policy of keeping short-term interest rates near zero.

Smaller companies generally have more trouble borrowing than their bigger counterparts, Roberts explains. But when the Fed is using all of its tools to spur growth, as it has during this recovery, they can borrow more cheaply. That increases their chances of success, Roberts says.

“It’s the cheap money, or the liquidity, that drives up stock prices,” he says.

To beat broader indexes, analysts say, it’s worth focusing on companies’ fundamental strengths — especially as correlations break down and companies’ financial results retake center stage.

Stovall says investors should focus on sectors that do well during periods of growth and select companies with strong analyst ratings and high price targets.

Calvasina says small-cap pickers should chase “low-quality” bets — tiny companies with low return on equity, negative earnings and low expectations among Wall Street analysts. That’s a lot easier for fund managers, who typically have access to much better company information than individual investors.

Companies that suffered from economic fears, such as homebuilders and shippers, have been outperforming and surprising investors. Their stock prices are jumping.

Take The Ryland Group Inc., a homebuilder in Westlake Village, Calif., with a market value of about $902 million. The stock has more than doubled since October’s low, despite its having lost money in each of the seven previous quarters. Ryland eked out a profit of 2 cents per share profit in the quarter ended Dec. 31, it said last week.

John Fox, director of research at Fenimore Asset Management in New York state, says traders should look for companies that aren’t already picked-over by Wall Street analysts.

“In small-cap world, you have many more stocks to pick from, and you can find companies that may have one analyst looking at them, or no analyst coverage at all,” he says. “That’s what’s different.”

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Follow Daniel Wagner at www.twitter.com/wagnerreports.