Stocks Rise on News of Slowing Pace
Stocks rallied Friday as investors welcomed the latest indication that the economy is slowing.
But the Treasury bond market seemed far less convinced by the fresh data.
News that American businesses added fewer jobs than expected in June helped drive the Dow Jones industrial average up 154.51 points, or 1.5%, to 10,635.98.
The Nasdaq composite had an even better reaction, soaring 62.63 points, or 1.6%, to 4,023.20.
The government said businesses added a net 206,000 jobs last month after cutting 165,000 positions in May. Equity investors apparently viewed the data as a sign that the economic expansion is slowing enough to preclude further interest rate increases by the Federal Reserve, but not enough to risk recession.
“We’ve passed the peak of economic strength and the Fed may just sit on its hands for the rest of the year,” said Garth Nisbet, who oversees $1.7 billion as chief investment officer at Crabbe Huson Group in Portland, Ore.
But in the bond market yields were only modestly lower on Treasury securities. The 10-year Treasury note slipped to 6.02% from 6.04% Thursday. The 1-year T-bill yield eased to 6.06% from 6.08%.
Some traders noted the bond market has been ahead of the stock market in telegraphing that the Fed may be succeeding in engineering a “soft landing” for the economy. Treasury yields have been falling for most of the period since mid-May.
But “there’s still a need for news that confirms a substantial [economic] slowdown for rates to drop a lot from here,” said Roger Early, who helps invest $10 billion in fixed-income at Delaware Investments in Philadelphia.
On Wall Street the Nasdaq index’s gain exaggerated the day’s move in the Nasdaq market as a whole. Rising stocks outnumbered losers by a rather slim margin of 20 to 17 on Nasdaq, though on the New York Stock Exchange winners had an 18-to-10 margin over losers.
Trading volume was moderate.
For the week the Dow gained 1.8% and the Nasdaq rose 1.4%.
Starting next week, second-quarter corporate earnings reports will take center-stage on Wall Street, analysts said.
Among Friday’s highlights:
* Major tech stocks led the rally on Friday, with Intel up $2.69 to $139.31, Apple up $2.63 to $54.44, Gateway up $4.75 to $61.50 and Broadcom up $8.13 to $235.06.
But Yahoo slid $5.88 to $116.50 after being downgraded to “buy” from “strong buy” by Andrea Williams Rice, an analyst at Deutsche Banc Alex. Brown. “Our more conservative ratings stem primarily from concern over slower-than-expected revenue growth,” she wrote in a note to clients.
Yahoo is expected to be among the first major companies reporting earnings next week.
* Many telecom shares also surged, despite bad news for Qualcomm, which tumbled $5.06 to $56.63. Winners included Nokia, up $2 to $54; Next Level Communications, up $4.88 to $99.94; and JDS Uniphase, up $2.19 to $116.19.
* Retail stocks surged despite some weak June sales reports on Thursday. Home Depot soared $4.25 to $55.50, Wal-Mart gained $4.06 to $61.56 and Gap jumped $2.13 to $35.50.
* Financial stocks, which would be expected to benefit if interest rates have peaked, staged only a mild rally. Chase Manhattan rose $2.06 to $50.06, Bank of America gained $1.63 to $47.44 and Goldman Sachs added $1.75 to $94.94.
* Vertex Pharmaceuticals rose $5.38 to $123.44 after the drug maker said it will post an unexpected profit in the second quarter. The developer of drugs for AIDS and other viral diseases said a delay in new federal financial guidelines allows the company to report major licensing fees as revenue.
* On the downside, GM slid $1.19 to $60.13, failing to get a lift from interest-rate optimism.
Food stocks also were weak, as investors took profits from the sector’s rally of recent months. Quaker Oats fell $1.25 to $75.13.
Market Roundup, C4
