Job Numbers Spark Rally on Wall Street
Stocks soared Friday as investors cheered the latest job report, boosting the Dow index more than 146 points for its biggest gain since late April.
A drop in oil prices and a strong earnings report from Alcoa, released after the bell Thursday, added to the upbeat atmosphere on Wall Street.
Economists differed over why the market rallied on the job report, which itself sent mixed signals.
The Labor Department said unemployment hit a four-year low of 5% in June. At the same time, the number of jobs created last month -- 146,000 -- was less than the 200,000 that had been widely expected.
Some analysts said stocks were rallying because job growth was tepid, which could prompt the Federal Reserve to end its series of interest rate hikes sooner than anticipated.
“Investors are beginning to see the light at the end of the tunnel,” said Sung Won Sohn, chief executive of Hanmi Bank in Los Angeles. “With these employment numbers, people are beginning to think the central bankers may stop even before the end of the year.”
Others said the employment snapshot gave investors confidence that the U.S. economy remained healthy despite oil hovering near $60 a barrel, though not so vigorous that the Fed might have to ratchet up its pace of quarter-point hikes.
“The jobs report was strong enough to signal that the economy is still chugging along at a healthy but not overheated pace,” said Jay Wong, a portfolio manager at Los Angeles investment firm Payden & Rygel.
In moderate trading, the Dow Jones industrial average jumped 146.85 points, or 1.4%, to 10,449.14. The broader Standard & Poor’s 500 index climbed 13.99 points, or 1.2%, to 1,211.86. The technology-heavy Nasdaq composite surged 37.22 points, or 1.8%, to 2,112.88.
Advancing shares outnumbered losers by 3 to 1 on the New York Stock Exchange and by better than 2 to 1 on Nasdaq.
All three indexes finished the holiday-shortened week with gains: The Dow rose 1.4%, the S&P; 500 gained 1.5% and the Nasdaq zoomed 2.7%.
Friday’s rally lifted the S&P; small-cap 600 index by 1.7% and the S&P; mid-cap 400 index by 1.2% -- both to record highs. The blue-chip S&P; 500, however, remains well below its peak in 2000.
European exchanges rallied as well, a day after the deadly terrorist bombing in London led to modest declines. Thursday’s attack sparked steep early declines before buyers stepped up.
On Friday, key indexes climbed 1.9% in France, 1.5% in Germany, 1.5% in Italy and 1.4% in Britain, reversing all or most of Thursday’s drops.
Analysts said investors believed that with most of the major economies in Europe reeling, central bankers there could soon cut interest rates.
“With the economies of France and Italy on the verge of recession, the next move by the European central bankers most likely will be a rate cut, and it could happen later this summer,” Sohn said. Europeans also realize that terrorism has become “an unfortunate fact of life,” he said.
Some economists cautioned that U.S. bankers might be reluctant to cut interest rates in the foreseeable future for fear of stoking inflation. They noted that compensation costs rose last month and that the jobless rate fell to 5% faster than most had expected.
In other markets, crude oil futures eased $1.10 to $59.63 a barrel in New York as traders secured profits after the recent rally, and the Organization of the Petroleum Exporting Countries said it would consider raising output limits.
Bond yields rose despite last month’s lower-than-expected payroll growth. Analysts said that with long-term Treasury rates already at relatively low levels by historical standards, traders would need to see clear signs of economic weakness before pushing yields lower.
The yield on the benchmark 10-year T-note climbed to 4.09%, from 4.06% on Thursday.
Among the equity highlights:
* Better-than-expected quarterly earnings lifted aluminum maker Alcoa, which gained $1.11 to $27.20; consulting firm Accenture, which surged $2.01 to $24.21; and clothing maker Polo Ralph Lauren, which rose $3.87 to $47.34.
* General Electric added 81 cents to $34.99 after Smith Barney issued a rosy research report on the conglomerate.
* Several biotech firms rallied after a Banc of America Securities analyst issued “buy” ratings. Human Genome Sciences climbed $1.07 to $13.25, Incyte advanced 61 cents to $8.53 and Exelixis gained 95 cents to $8.40.
* Cable TV equipment maker Scientific-Atlanta rose $2.86 to $36.83 on an upgrade from JPMorgan Chase.
* Earnings disappointments hurt engineering firm Shaw Group, which fell $1.07 to $21.55; music retailer Trans World Entertainment, which lost $1.08 to $10.96; and software maker Altiris, which slid $1.84 to $13.01.
