Jobs Data, GM Sales Lift Stocks
Stocks rose Friday as a late-session rally on a surprising drop in the nation’s jobless rate and a calming outlook by General Motors overtook early selling on continued weakness in the manufacturing sector.
The Dow Jones industrial average climbed 78.47 points, or 0.7%, to end at 10,990.41, while the Nasdaq composite index gained 38.95 points, or 1.9%, to 2,149.44. The benchmark Standard & Poor’s 500 index rose 4.85 points, or 0.4%, to 1,260.67.
Winners led losers 3 to 2 on both Nasdaq and the New York Stock Exchange, but the day’s gains were made on light volume in both markets.
“The jobs report was positive. The Street now needs to see good news. During the first four months [of the year], we wanted bad news because we wanted the [Federal Reserve] to become aggressive” in easing monetary policy, said Charles Payne, chief strategist at Wall Street Strategies.
After Fed interest rate cuts of two-and-a-half points since the beginning of the year, Payne said, “now we need to see that action seep into the economy, to reveal itself in some of these economic numbers.”
For the week, the Dow was off 15 points; the Nasdaq was down 101 points, or 4.5%; and the S&P; 500 was off 17 points, or 1.3%. Year to date, the Dow is up 1.9%, the Nasdaq down 13% and the S&P; 500 down 4.5%.
The Labor Department said the jobless rate fell to 4.4% in May from 4.5% in April, showing the jobs market was holding up despite the economic slowdown. Economists had predicted a rise in unemployment. The last time the jobless rate fell was in September 2000.
But news of weak manufacturing activity temporarily damped enthusiasm. The National Assn. of Purchasing Management’s monthly gauge of industrial activity fell in May to 42.1 from 43.2 in April, but remained above a decade-low of 41.2 in January.
A reading below 50 signals contracting manufacturing activity, which comprises 20% of the U.S. economy. The NAPM index has held under 50 for 10 months, but a small improvement since January had boosted hopes that production could recover as companies work down their large inventories and new orders pick up.
“The underlying tone was pretty positive with the employment numbers. The NAPM threw a different light on things, but overall the employment figures win the day. It is a thin market today, but a good way to start out the month,” said Peter Coolidge, managing director of equity trading at Brean Murray & Co.
Buying gathered strength late in the day after General Motors, the world’s largest auto maker, said U.S. vehicle sales, including its Saab division, rose 1% to 459,050 in May, beating predictions of a sales downturn.
Analysts had expected GM’s sales to fall roughly 10% last month over the same period a year ago. GM, a Dow component, gained $1.64 to $58.54, the highest close in nearly three months.
Chip-equipment maker Novellus Systems climbed $2.50 to $50.40, and contract electronics manufacturer Flextronics International gained $1.87 to $27.10 after saying profit will meet forecasts.
“If there’s room for surprises from companies on earnings, it should come from the Nasdaq companies,” said Richard Sichel, chief investment officer at Philadelphia Trust Co. “There’s some hope the big names will come out and say things are better than they expected.”
The bond market completed its biggest two-day gain in two weeks after the NAPM report eased concern that the Fed rate cuts would accelerate inflation. The yield on the 30-year Treasury bond, the most vulnerable to inflation, fell to 5.70% from its Thursday close of 5.77%. The yield on the benchmark 10-year Treasury note dropped to 5.37% from 5.39% Thursday--its lowest in more than three weeks.
Among individual issues, diversified manufacturer Tyco International fell 93 cents to $56.52, and was the most heavily traded on the NYSE.
Tyco said it will sell $2.2 billion in common stock in a public offering to repay debt from recent acquisitions.
AT&T;, the nation’s biggest long-distance telephone company, rose 32 cents to $21.49 after it announced an increase in basic per-minute residential calling rates.
Market Roundup, C4
