Jobs News Puts S&P;, Dow in Record Books
U.S. stocks rose to records Friday, sending the Standard & Poor’s 500 index above 700 for the first time as news of an unexpected drop in employment sent bond yields tumbling.
The Dow Jones industrial average rose 60.01 points to 5,992.86, nearing the milestone 6,000 mark. The U.S. Labor Department report that the economy lost 40,000 jobs last month eased concern that the Federal Reserve Board would raise interest rates soon in an effort to stop the economy from overheating.
The S&P; 500 index rose 8.68 points to a record 701.46, extending its gain for the year to 13.9%. The index, which crossed 600 on Nov. 17 last year, was up 2.2% for the week.
Among blue chips, General Electric, Coca-Cola and DuPont paced the advance. The Dow would have finished closer to 6,000 had not been for a decline in Aluminum Co. of America, on news that it had posted a big drop in third-quarter profit.
The Dow industrials were up 2% on the week. The blue-chip average has now rocketed back by about 800 points, or more than 15%, from the nadir of July’s sell-off.
That tailspin was instigated largely by worries that signs pointing to rising production costs would persuade the inflation-wary Fed to raise its key lending rates, an action that would in turn slow consumer spending and perhaps weaken corporate profits.
The inspiration for Friday’s rally was a report that the economy had lost tens of thousands of jobs and that unemployment had unexpectedly edged higher in September from a seven-year low in August. The figures offer the strongest evidence yet that business activity may be slowing sufficiently without the central bank’s intervention. Investors were heartened when Fed policymakers decided to leave rates alone last month.
“The report makes it crystal clear that the Fed doesn’t need to raise rates in October or November. And while the Fed’s away, the market will play,” said Peter Canelo, chief investment strategist at Dean Witter Reynolds.
Many economists had been forecasting an increase of about 170,000 payroll jobs in September. The jobs decline is the first setback since January, the government reported. Although the figures helped validate the Fed’s decision on interest rates, some analysts said they also raise a caution flag.
“The other side of the coin is that we’re probably witnessing the peak of the economy now,” said Dan Ascani, president and research director at Global Market Strategists Inc. in Gainesville, Ga.
Bonds rallied on the tamer inflation outlook. Higher inflation or interest rates make the fixed payoff on bonds less attractive, forcing down prices to improve the yield. As bond prices rose, the yield on the 30-year Treasury bond fell from late Thursday’s 6.83% to 6.74%, the lowest level since mid-August.
Advancing issues outnumbered decliners by a 5-2 margin on the New York Stock Exchange. The NYSE composite index rose 4.02 points to 374.16, for its fourth record finish this week.
The Nasdaq composite index rose 14.47 points to 1,247.56, and now sits about 1 1/2 points shy of its all-time high, set June 5. The Nasdaq market, laden with more volatile technology and speculative issues, has lagged the blue chips in rebounding from July’s sell-off, when the Nasdaq composite dipped as low as 1,008.
The American Stock Exchange market value index, also dominated by more speculative shares, rose 7.29 points to 579.89, but it’s still about 35 points from its peak, achieved in May.
Among Friday’s highlights:
* Alcoa, the world’s largest aluminum company, put a drag on the Dow when it reported that third-quarter earnings tumbled 42% because of a slump in metal prices. The stock fell as low as 57 1/8 before finishing at 60, down 3/8.
* Bellwether technology shares continued their recent resurgence on optimism for improving demand in the computer industry. Intel jumped 2 3/16 to an all-time high of 101 11/16; Microsoft rose 2 3/8 to 136 3/8; and Dell Computer rose 2 7/8 to 84 7/8. IBM rose 1 5/8 to 126 5/8.
* Los Angeles-based mortgage broker Aames Financial rose 1 to 59 on a day when its executives were traveling promoting the company to investors. Its stock has risen 16% in the last five days.
* KinderCare Learning Centers surged 3 1/2 to 19 3/4 a day after Kohlberg Kravis Roberts said it agreed to acquire the nation’s largest child-care company for $597 million.
* Raytheon fell 4 1/8 to 48 7/8 after reporting that its third-quarter earnings will be down about 15% from last year, largely because of contract delays in its engineering and construction unit and weak appliance sales.
Overseas, Tokyo’s Nikkei-225 stock average fell 0.9%, Frankfurt’s DAX index rose 0.3% and London’s FTSE-100 rose 0.6%.
* OUT OF WORK
The U.S. unemployment rate inched up to 5.2% for September. A1
