Stocks Rally on Jobs Data
Stocks had their biggest rally of the year Friday as lower-than-expected job growth figures eased concern the Federal Reserve would accelerate the pace of interest rate hikes. The Dow Jones industrial average climbed more than 120 points.
Long-term bond yields tumbled on the Labor Department jobs report, with the yield on the benchmark 10-year Treasury note falling to a seven-week low of 4.08% from 4.16% on Thursday.
The 30-year T-bond yield dropped to 4.48% from 4.58% and now is at the lowest level since mid-2003.
The dollar initially fell on the jobs data, then shot higher after Federal Reserve Chairman Alan Greenspan expressed optimism that the U.S. trade and budget deficits would begin to ease.
The euro sank to $1.288, down nearly a penny from Thursday and a three-month low.
The Labor Department said the nation created a net 146,000 jobs last month, well short of the 190,000 many analysts had expected.
Although disappointing employment growth has driven stocks lower in the past, the numbers assuaged investors’ fears that inflation would become an issue.
That could mean that the Fed will remain on its self-described “measured” pace of credit tightening, analysts said. The central bank on Wednesday raised its key rate to 2.5% from 2.25%, the sixth increase since June.
Buyers took control on Wall Street, driving the Dow up 123.03 points, or 1.2%, to 10,716.13. It was the first triple-digit gain for the index in 2005 and the best one-day advance since Dec. 1.
Broader market gauges also rallied. The Standard & Poor’s 500 jumped 13.14 points, or 1.1%, to 1,203.03, topping the 1,200 mark for the first time since Jan. 3. The Nasdaq composite gained 29.02 points, or 1.4%, to 2,086.66.
Rising stocks outnumbered losers by 3 to 1 on the New York Stock Exchange and by 2 to 1 on Nasdaq.
The week’s good news -- successful elections in Iraq, no surprise from the Fed on interest rates and oil prices trending downward -- helped investors put Friday’s jobs report in perspective, analysts said. Economic growth without higher inflation is “the sweet spot” for the stock market, said Scott Wren, equity strategist at brokerage A.G. Edwards & Sons.
“This economic environment is just very modest and very sustainable.... That’s the kind of environment that’s good for stocks,” he said.
For the week, the Dow rose 2.8%, the S&P; 500 climbed 2.7% and Nasdaq jumped 2.5%, the second straight week of gains for all three indexes.
The Dow and the S&P; 500 now are down less than 1% in 2005. Nasdaq, however, remains down 4.1% as technology shares and smaller stocks were hit the hardest in the sell-off of the first three weeks of the year.
In other market highlights:
* Falling bond yields stoked the housing sector by boosting expectations that mortgage rates too will head lower.
Los Angeles-based KB Home surged $4.22 to $116.22. Pulte Homes gained $4.38 to $70.72 and D.R. Horton climbed $3.23 to $43.84. All three were at record closing highs.
* Semiconductor stocks led the tech sector higher after Prudential Equity Group raised its rating on the industry to “favorable” from “unfavorable,” citing improving fundamentals. Texas Instruments jumped $1.67 to $24.80, Advanced Micro Devices climbed 82 cents to $17.49 and Intel rose 62 cents to $23.
* Tobacco shares surged after a federal appeals court said the government could not attempt to take as much as $280 billion in past profits under a racketeering law. Altria Group climbed $3.26 to $67. Reynolds American gained $3.69 to $85.60.
* Temple-Inland soared $10.67 to $75.75 after the paper maker said financier Carl Icahn’s fund plans to buy up to $500 million of its stock.
* Among initial public stock offerings, Glendale-based American Reprographics rose 75 cents to $13.75 on its first day of trading on the NYSE.
