Dow Gains 167 as Yields Slide On Job News
Blue chip stocks soared Friday as Wall Street shook off its recent jitters and embraced a government report showing strong U.S. job growth in May.
The Dow Jones industrials rocketed 167.15 points, or 1.9%, to 9,037.71, the biggest gain in four months.
The broad market also rose, though not as powerfully. And in something of a surprise, bond yields fell even though the May employment report pointed to significant wage gains--a potential inflationary worry, at least to the Federal Reserve Board, experts noted.
In the stock market analysts said many investors were relieved by the healthy employment report because it suggests that strength in the domestic economy will continue to offset the drag from Asia’s financial woes.
Concern about Asia’s effect on U.S. companies’ profits has helped depress the stock market since late April.
“The worry has been over corporate earnings over the past couple weeks,” said Bruce Bittles, a market strategist at J.C. Bradford & Co. in Nashville. But “the fact that there’s a strong jobs market means the [domestic] economy is strong,” he said.
“Folks are saying we still have a good eeconomy, we have growing productivity, so the fact that the labor market is getting tighter and tighter is not a problem,” said Alfred Goldman, market analyst at brokerage A.G. Edwards & Sons in St. Louis.
In the bond market--which has been troubled periodically this year by the Fed’s hints that it could raise interest rates to cool demand if rising wages begin to push prices of goods and services higher--the yield on the bellwether 30-year Treasury bond slid from 5.81% on Thursday to 5.78% Friday, near a four-month low.
“What’s the concern of the Fed? Job growth that creates inflation--and we aren’t seeing any of that [inflation],” said John Burgess, who oversees $90 billion of bonds at Bankers Trust Global Investment Management in New York.
On Wall Street stocks were higher from the start of trading, and blue chips padded their gains as the session wore on.
A report late Thursday from technology giant Motorola Inc., warning of a huge second-quarter loss in part because of weakened demand from Asia, failed to hold blue chips back.
“The [domestic] economy is still good, and that ought to be good for earnings,” said Bill Barker, chief investment strategist at brokerage Dain Rauscher in Dallas.
Even so, many tech stocks were weak for much of the day.
The tech-heavy Nasdaq composite index, which earlier this week was down more than 9% from its late-April peak, gained 12.97 points, or 0.7%, to 1,782.92 on Friday.
Winners topped losers by 22 to 18 on Nasdaq and by a stronger 19 to 10 on the New York Stock Exchange. However, trading volume was fairly subdued.
For the week the Dow rose 1.6%, while the Nasdaq index added 0.2%.
Among Friday’s highlights;
* Blue chips were paced by Walt Disney, up $5.13 to $114.69 after Morgan Stanley Dean Witter & Co. analyst Richard Bilotti said Disney will show annual gains in operating earnings of as much as 15%. He raised his rating on the stock to “strong buy.”
Other blue chip winners included Dupont, up $2.88 to $79.63 on rumors it may bid for Archer-Daniels-Midland, which soared $2.63 to $21.25.
Also, Merck jumped $3.88 to $119.56 and battered Philip Morris leaped $2.38 to $38.63.
* Retail stocks were hot as investors focused on strong consumer spending. Sears jumped $2.13 to $62.75, Nordstrom leaped $2.19 to $75.13 and Wet Seal surged $2.38 to $34.38.
* Oil stocks rose even as near-term crude oil futures slipped, despite pledges from several oil-exporting nations to cut production. Chevron jumped $2.38 to $82.50. Unocal rose $1.81 to $38.25.
* In the tech sector Motorola fell 56 cents to $50.94. The stock has already plunged from a 52-week high of $90.50. Among other tech issues, IBM gained $2.81 to $118.88 and Intel rose $1.63 to $69.81. But Microsoft edged up just 19 cents to $86.25. The Morgan Stanley high-tech stock index, up 1.3%, lagged the Dow’s rise.
European and Latin American stock markets also were strong, helped in part by Wall Street’s rise.
In currency trading the dollar was quoted at 139.75 yen in late New York trading, up from 138.27 yen late Thursday. Earlier, the dollar rose as high as 139.93 yen, a mark not seen since June 20, 1991.
Market Roundup, D4
* GOOD NUMBERS: Economy created 300,000 jobs in May, holding unemployment to 4.3%. A1