An unexpected drop in unemployment rate and easing worries over a possible default by Dubai World sent stocks higher Friday but investors grew concerned that an improving employment picture would mean higher interest rates. Those jitters sent the dollar sharply higher while treasury and gold prices fell.
While the Labor Department’s report that the economy shed 11,000 jobs last month was a welcome sign as it boosted hopes for an economic recovery, the concerns for increased interest rates kept the gains in check.
Gold prices recorded their steepest fall in a year, plunging 4% to $1,169.50 an ounce. Crude-oil prices also weakened, falling below $76 to $75.47 for the first drop below $76 since October 14, as higher inventories and a weak dollar caused traders to book profits. Treasury prices fell, with the price on the 10-year off 27/32 as its yield rose to 3.478%.
Meanwhile, a Treasury official said Sunday the administration now believes the government bailout cost of imperiled financial firms will now be at least $200 billion below the August estimate of $341 billion. Also, Treasury Secretary Timothy Geithner said Friday the administration expects to have $175 billion in repayments from the banking system by the end of 2010.
On Friday, the Dow Jones industrial average, which hit a 14-month high of 10,516.70 in the morning trading, closed up 23 points, or 0.2%, at 10388.90. The S&P 500 index rose 6 points, or 0.6%, to 1,105.98 and the Nasdaq composite index rose 21 points, or 1%. All three indexes gained for the week. On the week the DJIA rose 79 points, or 0.8%, helping the index notch up gains of 18.4% year to date. The S&P added 1.3% on the week for a 22.4% gain on the year. Tech-heavy Nasdaq, helped by the strength in technology stocks, continues to be the outperformer, and has recorded a 39.1% year-to-date increase. The index rose 2.6% for the week.
This week’s calendar contains few items of market-moving potential, offering a period of reflection perhaps as traders weigh their options between further gains in riskier investments and safe haven plays after the market’s sharp year-to-date advances. The week also includes speeches from a number of key Fed speakers, starting with Chairman Ben Bernanke’s 12:00 PM ET remarks today. New York Fed President Dudley is also slated to take the mike after the close today. Over the weekend, Treasury Secretary Geithner noted the economy is “gradually growing,” with unemployment likely to decline next year.
