Stocks surge on job data
The stock market rallied sharply Friday, driving the S&P; 500 index to a record and pushing several other gauges near all-time highs, after a report of solid job growth alleviated fears of a recession.
The unemployment data fed a belief among investors that the summer’s brutal credit crunch was steadily yielding to calmer financial markets and renewed economic growth.
The Labor Department reported that payrolls increased by 110,000 jobs in September. And, in a “never mind” moment, the government revised its figures for August to show a gain of 89,000 jobs rather than the 4,000-job loss originally reported.
“The overwhelming majority [of investors] were braced for a poor jobs report,” said Robert Bissell, president of Wells Capital Management in Los Angeles. “It’s a relief that you didn’t have another shoe drop.”
The S&P; rose 14.75 points, or 1%, to 1,557.59, surpassing its previous record close of 1,553.08 set July 19. The Dow Jones industrial average climbed 91.70 points, or 0.7%, to 14,066.01, just off its peak of 14,087.55 recorded Monday.
Smaller-stock indexes posted steeper gains, putting them close to their July highs. The Russell 2,000 small-cap index surged 15.71 points, or 1.9%, to 844.86.
Advancers outnumbered decliners by more than 3 to 1 on the New York Stock Exchange.
The tech-focused Nasdaq composite index climbed 46.75 points, or 1.7%, to 2,780.32 -- still far from its 2000 all-time high.
At least for the day, investors paid little attention to the fact that the economy’s resilience reduced the odds of an immediate Federal Reserve interest-rate cut. There had been widespread conviction until last week that the Fed would cut its key interest rate again at the end of this month after slashing it by half a point in September.
Futures trading Friday indicated that investors expected a quarter-point rate reduction by the end of the year.
“I don’t believe [Fed Chairman Ben] Bernanke is going to continue to lower interest rates to save the speculators who are on the wrong side of the sub-prime issue,” said Bill Buechler, president of Barclay Partners Asset Management, a hedge fund firm in La Jolla.
For the week, the market saw gains of 1.2% for the Dow, 2% for the S&P; 500, 2.9% for the Nasdaq and 4.9% for the Russell 2,000.
The payroll data spooked bond investors, who worried that robust employment and wage gains could spark higher inflation. The yield on the 10-year Treasury note rose to 4.64% from 4.51% on Thursday.
“I was a little surprised that [the bond market] sold off as much as it did,” said Mario DeRose, fixed-income strategist at Edward Jones in St. Louis.
The dollar ended mixed against other major currencies while gold prices rose. Lower interest rates would make the dollar a less attractive investment.
Oil prices fell. Crude futures slipped 22 cents to $81.22 a barrel on the New York Mercantile Exchange.
The job report came after Merrill Lynch said it would report a third-quarter loss because of $5 billion in write-offs -- $4.5 billion on mortgage-related holdings and $463 million on securities used to finance private-equity takeovers.
Meanwhile, Washington Mutual said its third-quarter profit would tumble 75% because of losses related to the sagging housing market.
Shares of both companies finished higher on hopes that the worst of their problems were over. Merrill gained $1.89, or 2.5%, to $76.67, and Washington Mutual rose 79 cents, or 2.2%, to $36.07.
Transportation and retailing stocks, which normally rise on expectations of economic improvement, were among the biggest gainers.
FedEx rose $1.31, or 1.3%, to $106.06; AMR, parent of American Airlines, gained 47 cents, or 1.9%, to $25.64, and Burlington Northern Santa Fe advanced $4.79, or 5.8%, to $86.78.
Among retailers, Circuit City jumped 37 cents, or 4.2%, to $9.13; Ann Taylor Stores rose $1.31, or 4%, to $34.47; and Macy’s gained $1.12, or 3.3%, to $35.10.
In other market highlights:
* BlackBerry maker Research in Motion soared $12.83, or 13%, to $113.37 after reporting its profit and revenue more than doubled in its latest quarter on strong subscriber growth.
* Two Internet rivals rose on favorable analyst reports.
Google gained $15.02, or 2.6%, to $594.05 after a Bear Stearns analyst said the stock would climb to $700 by the end of 2008 as the company lured more users to its YouTube video site and more ad spending shifted to the Web.
Yahoo rose 73 cents, or 2.7%, to $27.88. Analysts at Sanford C. Bernstein put the combined value of Yahoo’s units at $39 a share and said selling the company to a buyer that would cut jobs could lift the shares to $45.
* Overseas, European stocks advanced on the U.S. job report. Key indexes in Britain, Germany and France rose 0.7%. Earlier, shares fell 0.2% in Japan and jumped 3.2% in Hong Kong.
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The Associated Press was used in compiling this report.
