Robust job report eases fears, lifts Wall Street
Wall Street ended an erratic week with a moderate advance Friday as investors welcomed a government employment report that painted the U.S. job market as robust heading into the holiday season, easing concerns that the economy is losing steam too quickly. The major indexes all posted gains for the week.
Long-term bond yields surged higher after the Labor Department released a better-than-expected report on November job growth, dimming prospects for an interest rate cut by the Federal Reserve. The 10-year U.S. Treasury note jumped to 4.55% from 4.48% on Thursday.
In recent weeks, fixed-income markets had responded to weak economic reports by estimating the timing for a Fed rate cut as early as March, said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh.
“Now, they have backed off that expectation and pushed the timing for a Fed rate cut back to June,” Hoffman said. “That’s the flip-flop the markets have been doing. When weak reports come out, the market raises the odds for a rate cut coming sooner rather than later. And then you get a couple of strong reports and they push the timing ahead into the second quarter.”
Wall Street has pored over economic data in recent months as it tries to determine whether the health of the economy warrants the run-up seen in stocks since September.
John Shin, an economist at Lehman Bros. Holdings Inc., said the jobs figure raised Wall Street’s hopes about a slew of economic data expected next week, including retail sales figures.
The Dow Jones industrial average was up 29.08 points, or 0.2%, at 12,307.49.
Broader stock indicators also gained. The Standard & Poor’s 500 index was up 2.55 points, or 0.2%, at 1,409.84, and the Nasdaq composite index was up 9.67 points, or 0.4%, at 2,437.36.
This week, the Dow rose 0.9%, the Nasdaq gained 1%, and the S&P; 500 added 0.9%. The gains help set the major indexes up for double-digit gains this year, with the Dow up 14.8%; the Nasdaq, 10.5%; and the S&P;, 12.9%.
Crude oil futures fell 46 cents to $62.03 a barrel in New York trading.
Enthusiasm over the job report was interrupted briefly by the University of Michigan’s preliminary consumer confidence reading for December, which came in at 90.2, compared with a reading of 92 that analysts expected and the 92.1 seen in November.
In other market highlights:
* Sub-prime mortgage bonds had their worst week of the year on concern about the failure of two lenders, the slowing housing market and the ability of borrowers to repay the loans, derivatives based on the securities suggest.
An index of credit default swaps based on bonds rated BBB-minus and consisting of sub-prime mortgages made this year fell 2.6% to 95.36. Credit default swaps are financial instruments based on bonds and loans that are used to speculate on the odds the debt will be repaid.
Traders reacted after two sub-prime lenders, Agoura Hills-based Ownit Mortgage Solutions Inc. and Sebring Capital Partners of Carrollton, Texas, closed this week, said Andrew Chow of Seneca Capital Management in San Francisco.
Sub-prime mortgages are made to people with poor or limited credit histories.
* 3M fell $1 to $78.56 after a Prudential Equity Group analyst lowered his rating on the diversified manufacturer, saying a pickup in sales growth could take longer than investors might expect.
* Banks also were in focus, with speculation that Bank of America might make a bid for London-based Barclays. BofA shares fell 83 cents to $51.66. Barclays shares rose $2.46 to a new yearly high of $58.25.
Citigroup rose $1.14 to $51.85 amid rumors that the financial conglomerate could be split up.
* Heelys, a maker of children’s sneakers that have built-in wheels, began trading on Nasdaq after an initial public offering and rose $11.60, or 55%, to $32.60.
* Yum Brands, which operates Taco Bell and other restaurant chains, fell $1.36 to $59.72 amid growing concern about an outbreak of E. coli in some of its restaurants.
