FINANCIAL MARKETS : Stocks Soar on Signs of Inflation-Free Growth : Markets: The Dow gains 44.75 while the dollar rises against the mark and the yen. Bond rates take a dive.
Signs that the economy is adding jobs without creating inflation sent stock prices soaring and long-bond interest rates plunging on Friday, with the Dow Jones industrial average gaining 44.75 points.
The dollar surged, rising to a three-month high against the German mark and a seven-week high against the Japanese yen. Oil and gold prices plunged.
Traders said the stock market was staging a technical rebound from sharp losses earlier this week.
The Dow Jones industrial average closed at 3,745.62, reversing a 38-point loss on Thursday and ending the week with a 37-point gain.
The Treasury’s bellwether 30-year bond yield plummeted to 7.91% from 8.02%, while its price, which moves in the opposite direction, shot up 1 6/32, or $11.875 per $1,000 of face value.
Interest rates dropped despite an unexpectedly strong November employment report, which showed the nation’s unemployment rate dropping 0.2-percentage point to 5.6%.
Analysts said that data might have signaled that the economy was growing at an inflationary pace, and could encourage the Federal Reserve Board to further raise short-term interest rates.
But bond investors focused on part of the jobs report that showed a drop in hourly wages and the average workweek, both of which signaled that inflation may not be an immediate problem. Signs of low inflation could slow down any plans the Fed may have for further tightening credit, and that was taken as good news for both stocks and bonds.
“The conclusion, at least for today--and it’s only tentative--is that the economy is going to slow to a no-boom, no-bust, sustainable, non-inflationary pace,” said Hugh Johnson, chief market strategist at First Albany Corp.
But Johnson and others said the market had been technically poised to rally after losing substantial ground earlier in the week, and that technical factors, like program trading, were responsible for some of the market’s gains.
“Stock investors are very, very tentative,” Johnson said. “The level of confidence is not high.”
Still, in the broader market, advancing issues had a solid 3-to-2 lead on decliners on the New York Stock Exchange, where volume was a moderate 284.76 million shares, down from 288.31 million Thursday.
Investors’ fears of higher interest rates were also softened by a drop of 0.1% in October in the government’s index of leading indicators, and a 0.4-percentage point drop in factory orders in October, analysts said.
Todd Clark, senior director in equity trading at Mabon Securities, said stocks were also getting a lift from the firmer dollar and lower oil prices.
The dollar ended the week in New York at 100.61 Japanese yen, up from 99.34 late Thursday. It was the currency’s first close above 100 yen since Oct. 11 and the highest since Oct. 7. The dollar closed at 1.580 German marks--the best finish against that currency since Aug. 31--up from 1.573 marks Thursday.
Crude oil futures plunged to a seven-week low after 28 Pennsylvania counties backed away from using a new gasoline aimed at reducing air pollution.
The prospect of reduced demand for the cleaner-burning fuel triggered a 6.8% drop in gasoline futures and a sharp decline in heating oil.
Meanwhile, light sweet crude oil for January delivery plummeted 83 cents on the New York Mercantile Exchange to $16.99 a barrel, the lowest settlement for near-term deliveries since Oct. 14.
On the New York Commodity Exchange, December gold sank $3.10 to $375.50 a troy ounce.
Among Friday’s highlights:
* Whirlpool Corp. sank 2 1/4 to 46 1/2 on news that it is halting shipments to discount retailer Best Buy Co. and that Whirlpool is being investigated by the Justice Department for price practices. Best Buy closed up 7/8 at 33 3/4.
* Quaker Oats Co. jumped 2 3/8 to 62 3/4 on rumors that Coca-Cola Co. will tell the Securities and Exchange Commission that it has bought more than 5% of Quaker’s stock. Neither Quaker nor Coca-Cola officials were immediately available for comment.
* ITT Corp. gained 3 1/8 to 80 1/8, boosted by a PaineWebber upgrading.
* Sun Co.’s shares lost 1 5/8 to 27 1/2 after it projected its fourth-quarter operating income at $10 million, down from $55 million a year ago.
* IQ Software dropped 4 1/4 to 11 3/4 after the software developer reported worse-than-expected third-quarter earnings.
* Intel Corp. rose 1/4 to 62 7/8. The stock was recovering from two days of sharp losses amid concerns about problems with the company’s Pentium computer chips.
* Amgen fell 1 1/4 to 56 3/4 and Synergen rose 1/64 to 9 3/64 after Amgen revised its antitrust application to acquire Synergen, postponing the acquisition until Dec. 15 from Dec. 3.
Overseas stocks closed lower. In Mexico City, stocks pared some of their earlier heavy losses but still closed sharply lower Friday, hit by rising tension in the southern state of Chiapas and by Thursday’s selloff on Wall Street, traders said. The Bolsa index ended 53.86 points lower at 2,537.48.
London’s Financial Times 100-share average ended at 3,017.3, down 22.3 points, while Frankfurt’s 30-share DAX average lost 8.08 points to close at 2,038.51. In Tokyo, the 225-share Nikkei average lost 15.30 points to finish at 18,998.30.
