Employment data help stocks rebound
The stock market ended the first week of the third quarter with a respectable gain Friday, shaking off early losses as investors found signs of strength in the government’s June employment report.
For the most part, investors were relieved to hear that the unemployment rate held steady at 4.5% in June for the third straight month, as expected, and that 132,000 jobs were added -- fewer than in May but slightly higher than the average forecast. The Labor Department data also showed that a larger number of jobs were created in April and May than previously thought, and that June’s average workweek ticked up 0.1%.
The market initially had mixed feelings about the report, which was the most significant economic release of the shortened Fourth of July week, and the major stock indexes began the day with declines.
Although the positive snapshot boded well for the long-term performance of the stock market, it also raised worries that a too-strong economy would make the Federal Reserve more willing to raise interest rates to curb inflation. Though the central bank said last week that inflation appeared to be moderating, it wants to see further evidence before it considers loosening monetary policy.
Treasury bond yields rose on the employment numbers. The 10-year Treasury note’s yield climbed to 5.18% from 5.14% late Thursday.
Though high yields can make home mortgages more costly, constrain deal-making and make bonds more attractive to investors relative to stocks, for many market watchers, higher rates are a positive sign.
John O’Donoghue, co-head of equities at Cowen & Co., said it was unlikely that investors would start selling stocks to invest in Treasuries unless the 10-year yield rises and stays above the 5.25%-to-5.3% level.
“If yields are going higher because there’s growth in the economy, that’s actually good for stocks,” O’Donoghue said.
The Dow Jones industrial average Friday rose 45.84 points, or 0.3%, to 13,611.68. The Standard & Poor’s 500 index gained 5.04 points, or 0.3%, to 1,530.44, and the Nasdaq composite index rose 9.86 points, or 0.4%, to 2,666.51.
The Russell 2000 index of smaller companies rose 2.18 points, or 0.3%, to 852.31.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange. Trading volumes were relatively low Friday, with many traders still off after the holiday Wednesday.
For the week, the Dow rose 203.06 points, or 1.5%; the S&P; 500 rose 27.09 points, or 1.8%; and the Nasdaq advanced 63.28 points, or 2.4%. The Russell 2000 index finished the week up 4.11 points, or 0.5%.
Crude oil futures, trading at 10-month highs, rose $1 to $72.81 a barrel Friday on the New York Mercantile Exchange, buoyed by renewed violence and kidnappings in Nigeria, Africa’s biggest oil producer.
The dollar was mixed against most other major currencies. Gold prices rose.
In other market highlights:
* Chicago Mercantile Exchange Holdings upped its bid to buy its rival CBOT Holdings for the third time ahead of Monday’s shareholder vote. Chicago Mercantile rose $19.11, or 3.4%, to $574.80, while CBOT jumped $17.85, or 8.7%, to $224.
* Macy’s jumped $2.22, or 5.6%, to $41.99. The department store chain has been rumored to be a buyout target, but the company has confirmed nothing.
* Newmont Mining climbed $2.20, or 5.6%, to $41.78 after the gold producer said late Thursday that it had eliminated all of its forward-sales gold contracts.
* Genzyme sank $4.02, or 6.2%, to $60.85. The company’s drug candidate tolevamer proved to be less effective than standard medication against bacteria-related diarrhea.
* Parametric Technology plunged $4.34, or 20%, to $17.23. The design and engineering software firm lowered its fiscal third-quarter profit and sales forecast.
* In Asian trading, Hong Kong’s main index rose 1.2% to its fourth straight record close. Shanghai stocks surged 4.6% after plummeting 5.3% on Thursday. Japan’s Nikkei average fell 0.4%.
* In Europe, key stock indexes rose 0.8% in Britain and Germany and 0.7% in France.
