Stocks rise despite dismal jobs report
Half a million job losses be damned.
That was the stock market’s improbable reaction Friday to the steepest job cutbacks in 34 years.
The Dow Jones industrial average rose more than 250 points in another pretzel of a trading session, overcoming an initial 250-point decline and gaining energy throughout the afternoon.
The rally lifted spirits across a jittery Wall Street, even if traders were at a loss to explain how stocks could power ahead when the threat of a long-lasting recession appeared to be deepening.
“This is just a reflection of the environment we’re in right now where nothing really makes any sense,” said Michael Church, senior portfolio manager at Church Capital Management in Yardley, Pa.
Besides the unemployment news, crude oil prices continued their dramatic descent, falling for the 12th time in 15 days as energy demand falls off amid the souring economy.
The Dow climbed 259.18 points, or 3.1%, to 8,635.42, but still closed the week down 2.2% after Monday’s 680-point drubbing.
The Standard & Poor’s 500 index advanced 30.85 points, or 3.7%, to 876.07, but ended the week down 2.3%. The Nasdaq composite index climbed 63.75 points, or 4.4%, to 1,509.31. It was off 1.7% for the week.
The market fell sharply in the morning after the government reported that companies did away with 533,000 jobs in November, the most since 1974 and more than almost all economists had expected.
The consensus estimate was for a 335,000 job loss, and most pessimistic forecasters envisioned around 400,000 cutbacks.
The muted reaction was due in part to the market’s fall on Thursday, when word of the deteriorating employment picture triggered an afternoon sell-off.
The dire economic news also increased speculation that the government will unveil a mammoth economic-stimulus package next month after President-elect Barack Obama takes office.
The rally in the face of distressing news prompted cautious optimism that the market had finally bottomed and would manage to stay above last month’s low despite a likely stream of bad economic reports into the early part of 2009.
“Who could have believed we could have gotten such an ugly employment number and the market would have salvaged itself?” said John Bollinger, head of Bollinger Capital Management in Manhattan Beach. “If you look over the past two weeks, the bad news has had less and less traction. Now if we could only get some good news, although where that would come from I’m not exactly sure.”
Other analysts doubted that stocks could mount a sustained rally.
“While an up day was up day and we’ll take it and be happy, there is probably, as we say in the South, ‘a bit more to chop,’ ” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Va.
Insurance stocks led the surge, with the S&P;’s financial index barreling ahead 8.6%.
Hartford Financial Services Group Inc. more than doubled in price after the insurer raised its earnings outlook and said its capital position was strong. Its shares rose $7.38 to $14.59.
Its announcement eased fears that the insurance industry would suffer the same convulsions that have decimated banks and brokerage firms.
Lincoln National Corp. climbed 42%, Principal Financial Group Inc. jumped 41% and Prudential Financial Inc. advanced 35%.
Energy stocks fell 1.3% after crude oil continued its recent sharp slide, falling $2 to $41.67 a barrel.
Yields on Treasury securities rose from their historic lows. The yield on the 10-year note rose to 2.71% from 2.55% on Thursday.
Shares of home builders rose despite record highs in mortgage delinquencies and foreclosures. Toll Brothers Inc. rose 7%, while NVR Inc. was up 4%.
Auto stocks were mixed as executives from Detroit’s Big Three carmakers renewed their plea for government assistance. General Motors Corp. was off 3 cents to $4.08, while Ford Motor Co. rose 6 cents to $2.72.
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