April nonfarm payrolls rose less than expected, spurring hopes the Fed will pause its tightening cycle
Stocks finished higher on heavy volume Friday, buoyed by a milder-than-expected April jobs report. Investors hoped the data meant a break from the Federal Reserve's interest-rate hikes, with focus shifting to the Fed policy statement next week, says Standard & Poor's Equity Research.
The Dow Jones industrial average rallied 138.88 points, or 1.21%, to 11,577.74, a new six-year closing high, paced by General Motors (GM ), Home Depot (HD ) and Disney (DIS ). The blue-chip rose 1.9% on the week and was within 200 points of its all-time high of 11,750.28, reached on Jan. 14, 2000.
The broader Standard & Poor's 500 index added 13.51 points, or 1.03%, to 1,325.76, closing the week up 1.2%. The tech-heavy Nasdaq composite climbed 18.67 points, or 0.8%, to 2,342.57, boosted by Microsoft (MSFT , for a weekly gain of 0.9%.
Investors cheered a surprising employment report Friday. April nonfarm payrolls rose 138,000 in April, well below expectations and the smallest increase since October. The unemployment rate held flat at 4.7%, while average hourly earnings posted a 0.5% gain, up from an upwardly revised 0.3% in March. Despite the unexpectedly low headline number, the report was solid, says Action Economics.
The report should also feed into the Fed's concerns about inflation, some economists say. "There is nothing about this report that can be described as weak," says John Ryding, chief U.S. economist at Bear Stearns. "The trend in both household and establishment job creation remains fairly robust based on the average of the last three months."
The economic calendar remains busy for the coming week. Markets are awaiting the Federal Reserve's policy-setting meeting, April retail sales figures, March data on international trade and business inventories, and more.
In corporate news Friday, San Francisco-based PG&E (PCG ) was higher on a report Warren Buffett's Berkshire Hathaway (BRK.B ) is looking to buy utilities.
Homebuilder Toll Brothers (TOL ) was higher despite trimming its forecast for the number of homes it expects to sell in fiscal 2006.
French drugmaker Sanofi-Aventis (SNY ) was lower after posting a 54% increase in first-quarter profit, boosted by a sale of rights for one product to Pfizer (PFE ).
Elsewhere in earnings, Warner Music Group (WMG was higher after reporting a $7 million loss for its fiscal second quarter. Earlier in the week, the record company rebuffed a takeover offer from rival EMI (EMI.LN ).
On the brokerage front, Boeing (BA ) was higher after Merrill Lynch raised the price estimate on shares of the world's second-largest commercial-jet maker to $97 from $85.
In the energy markets Friday, June West Texas Intermediate crude oil futures closed up 25 cents at $70.19 a barrel, a day after their biggest two-day slide since 2004.
European markets finished higher. In London, the Financial Times-Stock Exchange 100 index rose 54.8 points, or 0.91%, to 6,091.7. Germany's DAX index climbed 73.97 points, or 1.22%, to 6,113.29. In Paris, the CAC 40 index gained 52.7 points, or 1.01%, to 5,286.4.
Most Asian markets were closed for holidays. On Tuesday, Japan's Nikkei 225 index rose 228.06 points, or 1.35%, to 17,153.77. On Thursday in Hong Kong, the Hang Seng index fell 13.05 points, or 0.08%, to 17,013.93. Also on Thursday, Korea's Kospi index rose 5.85 points, or 0.41%, to 1,441.02.
Treasury yields retreated on the payroll data. Prices for 10-year Treasury notes rose to 95-11/32 with a yield of 5.11%, while 30-year bonds gained to 89-15/32 for a yield of 5.2%.