US stocks up
US investors found some reassurance in weak job growth figures today, and sent stocks sharply higher on the assumption that the numbers will prompt Federal Reserve to be less aggressive in raising interest rates.
The Dow Jones industrials climbed more than 120 points as Wall Street had its best week of 2005.
The markets opted for a glass half full approach to the Labour Department’s job creation report, which showed there were just 146,000 new jobs last month, far fewer than the 200,000 expected.
December’s job gains were revised downward to 133,000 from the 157,000 reported a month ago.
While such a disappointing report has driven stocks lower in the past, the figures assuaged investors’ fears that inflation would become an issue.
With the US economy growing at a tepid rate, inflation is unlikely to be a factor, and the Fed Reserve’s modest stance on raising interest rates would remain unchanged.
“I certainly think this (jobs) report provides no reason for the Fed to turn more aggressive in its tightening. That’s because while it’s creating jobs, the economy is not booming and there’s not a lot of labour-cost pressure in the system,” said Richard Rippe, chief economist at Prudential Equity Group in New York.
The Dow Jones industrial average rose 123.03, or 1.2%, to 10,716.13. It was the first triple-digit gain for the Dow in 2005 and the best one-day gain since December 1.
Broader stock indicators also moved substantially higher. The Standard & Poor’s 500 index was up 13.14, or 1.1%, at 1,203.03, breaking through the 1,200 level for the first time since January 3. The Nasdaq composite index gained 29.02, or 1.4%, to 2,086.66, the index’s best close since January 18.
The week’s good news – successful elections in Iraq, no surprises from the Fed on interest rates and falling oil prices – prompted much of the gains and helped investors put the jobs report in perspective, analysts said.
“It really is the sweet spot,” said Scott Wren, equity strategist for AG Edwards & Sons. “This economic environment is just very modest and very sustainable, with non-inflationary growth. That’s the kind of environment that’s good for stocks.”
For the week, the Dow rose 2.77%, the S&P 500 climbed 2.7% and the Nasdaq gained 2.5%. The Dow and S&P 500 are only down less than 1% for 2005. The Nasdaq, however, remains down 4.1%, as small-cap stocks and technology shares have taken the brunt of investors’ unease.
Time Warner fell 12 cents to 18.04, even though it beat expectations as profits, excluding one-time items, beat Wall Street expectations by 4 cents a share.
Human resources firm Hewitt Associates was up 2.19 at 31.28 after reporting its first-quarter earnings rose 16%.
Shares of tobacco companies surged after a federal appeals court said the US government could not attempt to take up to 280 billion in past profits under a racketeering law. Altria Group, parent of Philip Morris USA, climbed 3.26 to 67 on the news.
Shares of Temple-Inland jumped 10.67, or 16.4%, to 75.75 after the lumber and paper producer said financier Carl Icahn’s fund plans to buy between 100 million and 500 million of Temple-Inland stock.
The Russell 2000 index of smaller companies was up 8.13, or 1.3%, at 637.45.
Advancing issues outnumbered decliners by nearly 5 to 2 on the New York Stock Exchange, where volume was heavy.
