Major stock indexes advanced to three-month highs Friday, as investors digested a favorable employment report and a mix of data on consumer sentiment, home sales, construction, and manufacturing. Markets will be closed Monday for the Labor Day holiday.
The Dow Jones industrial average rose 83 points, or 0.73%, to 11,464.15, an increase of 1.6% on the week. The broader Standard & Poor's 500 added 7.19 points, or 0.55%, to 1,311.01, a 1.2% weekly advance. The tech-heavy Nasdaq composite gained 9.41 points, or 0.43%, to 2,193.16, ending the week up 2.5%.
Trading was light ahead of the long weekend. NYSE volume was decidedly positive, with 22 issues advancing for every 11 issues declining, while Nasdaq breadth was 16-14 positive.
The monthly jobs report was the main event Friday. Nonfarm payrolls rose 128,000 in August, in line with expectations, while average hourly earnings edged up 0.1%, less than expected. Meanwhile, the University of Michigan's final August reading for consumer sentiment rebounded to 82.0, stronger than forecast, from a 78.7 preliminary print.
The National Association of Realtors' pending home sales index tumbled 7% to 105.6 in July from 113.9 in June. Construction spending fell 1.2% in July, a steeper decline than analysts projected. The Institute for Supply Management's index of manufacturing activity unexpectedly dipped to 54.5 in August.
The employment report won't dispel the Federal Reserve's inflation worries, some analysts say. "While these data will encourage the Fed to remain on hold in September, the tightness in the labor market and the rate of increase in average hourly earnings should continue to cause concern at the Fed about upside risks to inflation," says John Ryding, chief U.S. economist at Bear Stearns.
Concerns also persist over economic growth. "Any relief over the week's in-line results is likely to prove short-lived," says Goldman Sachs economist Andrew Tilton. "The housing sector is deteriorating ever more rapidly, and tenuous consumer confidence is one hint of the spillover effects we think will become evident before the end of the year."
The economic calendar is light next week. Data releases are set to include revised second-quarter productivity data, the Federal Reserve's Beige Book report, and the Institute for Supply Management's non-manufacturing business activity index.
In corporate news, Bristol-Myers Squibb (BMY) and Sanofi-Aventis (SNY) were higher after a federal judge granted the drugmakers a preliminary injunction ceasing sales of a generic version of their Plavix blood thinner, the world's second-biggest-selling drug.
Automakers reported mixed August sales. Toyota (TM) provided some strength, posting 17% higher U.S. vehicle sales, while DaimlerChrysler (DCX) and Nissan each said sales fell an unexpectedly modest 3%.
Lagging analyst forecasts were General Motors (GM) and Honda (HMC). Ford's (F) 12% sales decline was close to projections.
In technology, Gateway (GTW) was lower after the computer maker said it will reject an unsolicited $450 million offer for its retail business.
Chipmaker Intel (INTC) was higher amid reports the company will cut at least 10,000 workers from the payroll to trim $1 billion in costs this year.
Coffee retailer Starbucks (SBUX) was higher after posting a 5% increase in August same-store sales growth, down from a 7% pace a year earlier but above Wall Street expecations.
Shares of Lockheed Martin (LMT) rose after the aerospace company won a $3.9 billion NASA contract to build a spacecraft to the moon. Fellow airplane maker Boeing (BA) was up on the successful completion of a missile defense flight test.
Among other stocks in focus, Qualcomm (QCOM) was higher after the wireless technology provider won an antitrust suit against chipmaker Broadcom (BRCM).
In the energy markets, October West Texas Intermediate crude oil futures closed down $1.07 at $69.19 a barrel in a shortened pre-holiday session.
European markets finished higher. In London, the Financial Times-Stock Exchange 100 index rose 43 points, or 0.73%, to 5,949.1. Germany's DAX index added 16.97 points, or 0.29%, to 5,876.54. In Paris, the CAC 40 index was up 18.41 points, or 0.36%, to 5,183.45.
Asian markets ended mixed. Japan's Nikkei 225 index edged down 6.51 points, or 0.04%, to 16,134.25. In Hong Kong, the Hang Seng index gained 31.45 points, or 0.18%, to 17,423.72. Korea's Kospi index advanced 3.93 points, or 0.29%, to 1,356.67
Treasury yields bounced higher initially after the as-expected payrolls number and the firm consumer sentiment print, but pulled back following the weak housing data. The 10-year note edged up in price to 101-06/32 for a yield of 4.73%, while the 30-year rose modestly to 94-06/32 for a yield of 4.87%.
"The bond market may have needed more weakness than we saw in today's August nonfarm payroll data to sustain the impressive rally of the past few weeks, but make no mistake-- this was a very soft report," notes David Rosenberg, North American economist at Merrill Lynch.