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Stocks Finish with Gains

Stocks finished higher, though off their best levels, Friday following stronger-than-expected employment data for May and a positive earnings forecast from technology leader Intel (INTC).

The Dow Jones industrial average finished up 46.91 points, or 0.46%, to 10,242.82. The broader Standard & Poor's 500-stock index added 5.87 points, or 0.53%, to 1,122.51. The tech-heavy Nasdaq composite index was higher by 18.36 points, or 0.94%, to 1,978.62.

The employment report for May, released Friday morning, showed that the economy added 248,000 nonfarm jobs in May, coming on top of an upwardly revised total of 346,000 jobs in April and 353,000 in March. The three-month period marks the strongest such period in four years. Economists had been expecting a gain of 200,000 jobs for May. The unemployment rate remained unchanged at 5.6% on the month.

Virtually every sector added jobs. Growth in the manufacturing sector -- of 32,000 jobs -- was a standout. The robust improvement lends more support to the case for an interest-rate hike by the Federal Reserve -- and may well give President Bush a boost in his bid for re-election.

With inflation and wage gains edging higher as well, economists at investment bank UBS believe the Fed will decide at its June 29-30 policy meeting "to begin nudging the Fed funds rate back toward neutrality." The firm's economists expect a 25 basis point (one-quarter percentage point) tightening in June, leaving the benchmark rate at 1.25%. "That modest move would be consistent with the measured pace that Fed officials have promised recently."

Investors also weighed an update from semiconductor maker Intel. The tech giant told the market that it expected its current quarter earnings to come in at the top end of its previously forecasted range. It said revenues would be in a range of $8 billion to $8.2 billion, with a gross profit margin of 60% or 61% amid better-than-expected results in its communications business. Intel shares bounced higher by 2% in after-market trading Thursday.

In other tech news, Computer Associates (CA) said Sanjay Kumar, former chairman and chief executive, will give up his post as chief software architect and leave the company entirely as it tries to settle an ongoing accounting probe.

Consumer electronics retailer Circuit City (CC) said price cuts drove a 6.4% gain in sales for stores open at least a year.

In other retailing news, Kmart Holding (KMRT) said it would sell up to 24 stores to Home Depot (HD) for as much as $365 million in an effort to improve its profitability after emerging from bankruptcy last year.

In an effort to compete more effectively, appliance maker Maytag (MYG) announced a restructuring that will include a 20% workforce cut and merging of its Hoover unit with other products.

Nestle SA of Switzerland denied it is interested in buying General Mills (GIS) after a report said it would make a $22 billion bid for the U.S. foods maker.

Citigroup (C) won initial approval to set up a life insurance venture with a Shanghai investment firm by early 2005. This would be a major move into a fast-growing market.

Continental Airlines (CAL) CEO Gordon Bethune warned that furloughs and wage concessions could be needed sometime this fall if jet fuel prices stay high. Nonetheless, airline stocks were higher amid a further decline in oil prices.

Next week investors will get a fresh batch of economic data including updates on wholesale trade, jobless claims, import prices, the producer price index, and a preliminary reading of the University of Michigan consumer sentiment index for June.

Earnings on the table next week include Take-Two Interactive Software (TTWO), Net2Phone (NTOP), Tommy Hilfiger (TOM), and National Semiconductor (NSM),

Treasury Market

Treasuries finished lower in price Friday, with the closing yield on the benchmark 10-year note at 4.77%. A stronger than expected May employment report, along with hawkish Fedspeak from Fed Governor Kohn, was sufficient to keep bears on the loose, reports Action Economics.

World Markets

European stock markets finished higher on the positive U.S. jobs update. London's Financial Times-Stock Exchange 100 index gained 19 points, or 0.43%, to 4,454.40. In Paris, the CAC 40 added 44.5 points, or 1.22%, to 3,698.87. Germany's DAX index jumped 44.85 points, or 1.14%, trading at 3,961.93.

Asian stock markets finished higher, rebounding from a sharp drop Thursday. Buying interest in exporters buoyed the market. Japan's Nikkei 225 index rose 101 points, or 0.92%, to 11,128.05. Hong Kong, the Hang Seng index gained 92.71 points, or 0.78%, to finish at 12,022.64.

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