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Stocks, Bond Yields Soar on Payroll Data

October 04, 2003|Kathy M. Kristof | Times Staff Writer

It was all about jobs on Wall Street on Friday.

Stock prices rose and bond yields soared as investors reacted to a better-than-expected employment report that provided evidence that the somewhat tenuous economic recovery may be on a stronger footing than previously believed.

"Both the stock and bond markets are marching to the beat of the same drummer: the health of the economy and the job market," said David MacEwen, chief investment officer for fixed income at American Century Investments in Menlo Park, Calif. "The market has been fixated on jobs because a lot of people had been questioning whether the recovery could persist if there was no job growth."

The employment report drove the Dow Jones industrial average up 84.51 points, or 0.9%, to 9,572.31, capping a strong week for stocks.

But investors dumped Treasury bonds, sending the yield on the benchmark 10-year T-note to 4.20% from 3.99% on Thursday.

Bond investors worry that the Federal Reserve could be more likely to raise interest rates as evidence mounts of an economic expansion. Rising rates hurt the value of existing bonds.

The stock market rally helped major indexes regain more of the ground lost in a sharp slide that began last week. Investor enthusiasm flagged late in the day, however. At one point, the Dow had been up 178 points.

Technology stocks were particularly strong, with the tech-heavy Nasdaq composite index up 44.35 points, or 2.4%, to 1,880.57. The Standard & Poor's 500 index climbed 9.61 points, or 0.9%, to 1,029.85.

Winners led losers by about 2 to 1 on the New York Stock Exchange and Nasdaq in heavy trading.

Nasdaq jumped 4.9% for the week, the S&P 500 was up 3.3%, and the Dow rose 2.8% -- registering the biggest weekly gains for all these indexes since spring.

The dollar also strengthened, climbing against most major currencies.

Reports over the last two weeks showing falling consumer confidence and weakness in the manufacturing sector had fueled speculation that mounting job losses might restrain consumer spending and curb economic growth. Friday's report alleviated some of that concern.

"I think the rally is sustainable," said Kevin Marder, market strategist at Ladenburg Thalman Asset Management in L.A. "The market remains convinced that 2004 will feature a robust economic recovery. Any dip in stock prices continues to be met by another wave of buying."

Employment-related companies surged on the jobs report. Monster Worldwide, which operates a career Web site, jumped $2.61 to $28.50, and Robert Half International, a staffing company, rallied $2.14 to $21.60.

Semiconductor stocks also took flight. Chip equipment provider KLA-Tencor shot up $3.35 to $55.98, and rival Applied Materials jumped 91 cents to $19.46. Intel, the world's No. 1 maker of chips, advanced 99 cents to $29.61.

Gold investors weren't so lucky. Gold, which touched a seven-year high last week, plunged $13.70, or 3.6%, to $369.40 an ounce in New York futures trading, its lowest since Aug. 26. The decline was the biggest one-day drop in six years.

Analysts said gold was hurt as money shifted to stocks and as the upbeat employment news undercut the case for gold as a haven in bad economic times.

Gold mining stocks slumped. Newmont Mining, the world's largest gold producer, shed $2.04 to $37.88.

In other highlights:

* Retailing stocks rose. Wal-Mart, the world's biggest merchant, advanced 42 cents to $57.48 after climbing as high as $58.22. Best Buy, the largest U.S. electronics chain, rose $2.08 to $51. Lowe's, the No. 2 home improvement retailer, jumped $1.49 to $55.49. Twenty-eight of the 29 stocks in the S&P 500 retailing index gained.

* Dow member 3M gained $1.75 to a record $73.03. Lehman Bros. said 3M's earnings might exceed expectations as new products drive growth. It boosted its recommendation on the stock to "overweight" from "equal weight."

* Foreign markets rallied with Wall Street. The German market surged 4.3%. The Brazilian market gained 1.2%

*

Bloomberg News and Reuters were used in compiling this report.

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