U.S. stocks rose Friday to their highest level in nine months as a better-than-expected July jobs report added to recovery hopes and indicated the recession is nearing an end. Nervous investors who had locked in profits in earlier sessions fearing the employment report would disappoint found a new reason to rejoice and sent stocks sharply higher.
The broad-based S&P 500 index rose 13 points, or 1.3%, to its highest point since October 6 as the Labor Department noted nonfarm payrolls tapered off in July. Results from a separate survey showed an unexpected decline in unemployment rate, indicating an improving employment picture. The Dow Jones industrial average rose 114 points to 9,370.07 and the technology-laden NASDAQ rose 27 points, or 1.4%, to 2,000.25. Volume remained moderate as 1.5 billion shares exchanged hands on the New York Stock Exchange where winners topped losers three to one.
The S&P 500 is now up 49.4% from its twelve-year lows hit on March 9. Last week, the DJIA advanced 2.2%, for a 6.8% year-to-date climb; the NASDAQ tacked on 1.1% for a 26.8% gain on the year; the S&P500 rose 2.3%, now standing on a 11.9% increase in 2009.
Better-than-expected earnings reports from companies, manufacturing data and growing signs that the economy is on a path to recovery have boosted sentiments on the Street and indicated that a recovery might indeed be underway. Then, Friday’s employment numbers positively surprised and indicated that the most vexing issue of the economy, unemployment, is showing some sings of moderation. As President Obama happily noted after release of Friday’s employment numbers, “the worst may be behind us.”
With $95 billion in Treasury auction slated for this week and investors turning to equities, US Treasuries lost their safety appeal. Treasuries dropped to their lowest levels since October as prices marked their sharpest weekly fall in six years. After a broad decline on the week, the US dollar jumped 95 cents to close at $79.105 against a basket of currencies, following bullish economic news on the employment front. In another development, the Senate provided a $2 billion extension of the “cash-for-clunkers” program.
The coming week will provide more data on the consumer, with key retailers’ results and July monthly sales figures. Among those firms, Wal-Mart (NYSE:WMT) will report results. The major discounter had decided to eliminate release of monthly comparable sales numbers, so its numbers will be closely watched. Also on the docket are: Abercrombie & Fitch (NYSE:ANF), JC Penney (NYSE:JCP), Kohl’s (NYSE:KSS), Macy’s (NYSE:M), Nordstrom (NYSE:JWN), and Urban Outfitters (NASDAQ:URBN).
