Blue-chip stocks surged higher and bond yields declined Friday on a positive jobs report for January, but the dollar fell sharply after U.S. Treasury Secretary Robert Rubin acknowledged concerns about the currency's strength.
The Dow Jones industrial average closed up 82.74 points, or 1.22%, at 6,855.80 after an early run-up of more than 95 points. The rally put the blue-chip index within striking distance of its record closing high of 6,883.90 set on Jan. 21. For the week, the Dow rose 42.71 points.
Sparking the rally was the employment report for January that showed stronger-than-expected job growth but only slight wage increases. The data muted fears of wage-driven inflation and eased fears of interest rate tightening any time soon by the Federal Reserve Board.
The tame inflation implications of the report sent the yield on the bellwether 30-year Treasury bond down to 6.69% from 6.75% late Thursday, dropping to the lowest level since Dec. 31, when it was 6.64%.
"The market got what it wanted, particularly from the hourly earnings number, which was very encouraging on inflation," said Guy Truicko, portfolio manager at Unity Management.
But Rubin's comments led to a reversal of recent gains in the dollar. At a news conference before leaving for today's meeting of the Group of Seven industrial nations, Rubin said the dollar has been "strong for some time now." The comments were taken as the first time Rubin has indicated the United States might be satisfied with the dollar's gains.
Rubin's comments especially affected the Japanese yen, which had been falling to one four-year low after another against the dollar in recent weeks.
In late New York trading, the dollar was quoted at 122.60 yen, significantly below its four-year peak of 124.70 yen earlier in the day and down from 123.54 late Thursday.
Rubin's acknowledgment that some nations have become concerned about the dollar's strength was taken as a conciliatory gesture toward the Japanese and raised expectations that the G-7 meeting would produce some kind of joint statement about the dollar.
Rubin said exchange rates would be a principal topic of discussion at the meeting.
When pressed about his statement regarding the dollar's continued strength, Rubin would not elaborate but said the statement had been well thought out and reflected the administration's views.
Rubin's comments initially triggered a decline in stocks, but prices rallied later in the afternoon. The Standard & Poor's 500 rose 9.41 points to 789.56, and the Nasdaq composite index was up 11.31 points to 1,357.71.
Among Friday's market highlights:
* Financial stocks were broadly higher, benefiting from the improved interest rate climate. Citicorp jumped 4 1/8 to 120 3/4, BankAmerica rose 3 5/8 to 118 7/8, and J.P. Morgan added 1 3/8 at 104 5/8.
American Express gained 3 3/8 to 65 3/8 on news that U.S. Justice Department staff attorneys are considering an antitrust suit against Visa and MasterCard.
* Olympic Financial lost 1 7/8 to 9 7/8, Mercury Finance tumbled 3/8 at 1 7/8, and Jayhawk Acceptance plunged 1 3/4 to 2 1/4 as auto lender shares continued to get battered in the aftermath of financial scandal at Mercury.
* Several technology stock leaders posted gains after two days of profit taking. Intel, which plunged about 11 1/2 points in the previous two sessions, rose 3 7/16 to 156 3/8 in active Nasdaq trading, while Microsoft rose 3 1/4 to 100 3/8. IBM rose 2 3/4 at 148 3/4, ending a four-session losing streak. But 3Com fell 1 1/2 to 50 3/4 on worries that prices and profit margins on a key product will fall, and America Online fell 2 1/4 to 36 7/8 amid concern about rising costs and service problems.
* Drugstore chain Revco climbed 3 3/8 to 41 3/8 after agreeing to a $2.8-billion stock acquisition by CVS, whose shares rose 3 1/8 to 47 1/8.
* Physician Support Systems plunged 8 3/4 to 7 1/2 after warning of disappointing fourth-quarter earnings.
* Harrah's Entertainment rose 1 7/8 to 20, even as investors said the casino operator won't be acquired by ITT for $35 a share. Business Week said ITT would buy Harrah's to make itself less attractive to Hilton Hotels. ITT lost 5/8 to 55 3/4; Hilton gained 3/8 to 27 1/2.
Overseas, Tokyo's Nikkei stock average fell 1.0%, Frankfurt's DAX index rose 1.1%, and London's FTSE 100 rose 1.0% to a new high.
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