Stocks closed broadly higher Friday and bond yields fell on a favorable January employment report, but the dollar tumbled after U.S. Treasury Secretary Robert Rubin acknowledged concerns about the currency’s recent strength.
The Dow Jones industrial average closed up 82.74 points, or 1.2%, at 6,855.80 after initially rising 95 points, surrendering it all, then resurging. The rally left the blue-chip index within striking distance of its record close of 6,883.90 set Jan. 21.
Sparking the rally was a drop in bond yields after the government reported strong job growth in January, but only a slight rise in wages. The data muted fears of wage-driven inflation and eased worries that the Federal Reserve Board will need to tighten credit soon.
The report sent the yield on the bellwether 30-year Treasury bond from 6.75% Thursday to 6.69%, lowest since Dec. 31.
But the dollar held center stage in late afternoon, after Rubin--on his way to meet today with finance ministers of the G7 industrialized nations--said the dollar’s hot streak against the German mark and Japanese yen will be a “principal topic.”
Rubin, who has continually preached the benefits of a strong dollar, said he still favored it but also added that the dollar has been “strong for some time now.” The carefully chosen comments were viewed as a hint that Rubin might accede to stabilizing the dollar if Germany and Japan fear a further weakening of their currencies.
Although weakness in the yen and mark helps boost Japanese and German exports by making them cheaper versus dollar-denominated goods, the Japanese in particular have suggested recently that they feared a wholesale devaluation of their currency.
After Rubin spoke, currency traders pushed the dollar down from a four-year high of 124.70 yen to 122.60 by the close of trading in New York. The dollar also slid to 1.661 marks from a peak of 1.675.
Still, others said Rubin’s remarks represented an attempt to slow the speed of the dollar’s ascent rather than to reverse its course. “I don’t think they’re as important as everyone is getting excited about,” said James McGroarty, chief currency manager at Potomac Babson Inc.
As for Wall Street, the dollar’s late-afternoon weakness deflated a morning rally, but stocks quickly rebounded. “We still have that perfect scenario in terms of the economy,” said Art Hogan, chief trader at Dean Witter Reynolds.
Others noted that weakness in the dollar could help U.S. multinational companies whose overseas earnings have been clipped by the dollar’s strength.
Indeed, blue chips led the rally, while smaller stocks lagged. The Russell 2,000 index of smaller stocks rose just 0.4%, versus the Dow’s 1.2% jump. Winners held a much wider edge over losers on the NYSE than on Nasdaq, and the Standard & Poor’s 500 index hit a record, up 9.41 points to 789.56.
* HEALTHY ECONOMY
271,000 new jobs were created in January as labor force swells. A1