U.S. Jobless Data Revives Markets; Bonds Sharply Higher; Dow Gains 52.28

A government employment report suggesting that the economy is growing at a more manageable rate brought the markets to life Friday, lifting the Dow Jones industrial average 52.28 points and igniting the biggest bond rally since mid-January.

The Dow was carried to a closing 2,054.59 after the release of figures showing that unemployment was higher than expected in August and that growth in non-farm employment was smaller than anticipated. The report suggested that the Federal Reserve Board won’t have to raise interest

rates to prevent further inflation in an overheated economy.

Trading volume on the New York Stock Exchange was 159.84 million shares, a respectable showing on a day when many traders had stayed home to extend a long weekend. Gaining stocks outnumbered decliners by a margin of nearly 4 to 1.

The Dow’s advance was its fourth largest this year and the biggest since the indicator moved 74.68 points on May 31.

The bond market also came to life. The bellwether 30-year Treasury bond closed the day up nearly 2 5/8 points, an increase of about $26 for a bond with a face value of $1,000. The increase was only slightly less than the $26.25 increase posted last Jan. 15.

Investors had been looking forward to release of the unemployment numbers with increasing trepidation through the week. The Federal Reserve Board had begun moving rates up after the last employment report showed a large increase in employment; adding to the suspense, a Fed governor had said publicly that the central bank would be keeping a close eye on the employment data.

The market has been nervous in recent days about signs of weakness in the Japanese stock market, which had aroused fears of a slide in that market that could drag down the U.S. market. The Japanese market’s Nikkei index fell 400 points on Thursday, prompting speculation that a long-expected decline of that market might be at hand. On Friday, however, the index gained 182.24 to close at 27,116.50.

Also depressing the markets in recent sessions was the extremely slow pace of trading. New York Stock Exchange volume fell below 100 million shares twice in the past week.

“All the signs seemed to be negative, so when this (employment report) came along, it really gave a lift,” said Gene J. Seagle, market analyst with Gruntal & Co., a regional brokerage in New York. Many professional money managers had liquidated much of their stock portfolios and retreated to the sidelines to await release of the figures.

Many analysts expected that the August data would show an increase in non-farm employment of 250,000 to 280,000 new jobs, said Larry Wachtell, market analyst with Prudential-Bache Securities in New York. In fact, the data showed only 219,000 new jobs had been created last month.

Importantly, the report showed that much of the new job growth was in the service sector, not in the manufacturing sector, he noted. Economists have been watching growth in manufacturing employment data for signs of the kind of rapid expansionary pressures that would kindle new inflation.

High-Tech Stocks Up

Despite the Dow’s impressive move, the index ended the week still in the middle of the narrow range of trading where it has been stuck for months. The Dow has moved between 1,970 and 2,150 since the beginning of the summer.

For the week, the Dow advanced 37.16 points, or 1.84%.

Among broader market averages, the Standard & Poor’s 500-stock index gained 6.13 points to close at 264.48, and the New York Stock Exchange composite index edged up 2.98 to 149.66.

The 50-point rise in the Dow caused the New York Stock Exchange to bar use of its automated trade-execution system for index-arbitrage program trades. The limit was put into effect after critics complained that such program trading worsened last October’s market collapse.

Notable among the advancing issues were technology stocks, which were bid down Thursday as investors worried about the effects of higher interest rates on the economy. International Business Machines added 3 3/4 to 114, while Digital Equipment gained 1 7/8 to 94 1/2, Hewlett-Packard advanced 1 3/8 to 47 and Cray Research rose 2 to 79 7/8.

Computer chip makers Motorola added 1 1/2 to 42 1/2 and Texas Instruments gained 1 1/8 to 40 1/2.

Amid reports that investor Carl C. Icahn has bought a 4% stake, Williams Cos. moved up 1 to 29 7/8.

Gould added to 22 1/2 as volume of 1.83 million shares put it fourth on the New York Stock Exchange’s most active list. Nippon Mining, which has proposed a $23.25-a-share takeover of the company, said it would sell off portions of Gould if the deal were consummated.

The American Stock Exchange market value index rose 2.44 to 295.62, as the NASDAQ over-the-counter composite index gained 3.55 to 376.51.

In London, stocks finished the day at their highs Friday, buoyed by a strong opening on Wall Street. The Financial Times 100-share index was up 16.4 points, or 0.94%, to close at 1,746.9.

OTHER MARKETS

Currency

Traders dumped the dollar in a hectic selloff.

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Commodities

Prices for Treasury bill futures soared as inflation fears faded.

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