August job losses were less than expected, though the jobless rate rose to a 26-year high. Next week's watch list: Beige Book, trade deficit, consumer sentiment
U.S. stocks wrapped up a rather lackluster week on Friday with a short-covering rally before the long Labor Day weekend. Industrial, technology, and telecom issues stood out in a slowly traded session.
Traders apparently found some hope in the U.S. employment report for August, which showed a smaller than expected drop in nonfarm payrolls of 216,000, but a larger than forecast rise in the unemployment rate to 9.7% -- the highest level in 26 years. Many economists see payrolls rising by yearend, notes S&P MarketScope.
On Friday, the 30-stock Dow Jones industrial average finished higher by 96.66 points, or 1.03%, at 9,441.27. The broad Standard & Poor's 500-stock index added 13.16 points, or 1.31%, to 1,016.40. The tech-heavy Nasdaq composite index gained 35.58 points, or 1.79%, to 2,018.78.
Treasuries plunged as stocks rose. The dollar index fell. Gold futures failed to crack $1,000. Oil futures fell.
Next week's economic calendar is light. The Federal Reserve's Beige Book survey of economic conditions on Wednesday will be a highlight, but is expected to merely reflect the Fed's cautious optimism on the recovery noted in Wednesday's August 11-12 FOMC minutes. The July trade report, scheduled for release Thursday, is expected to show the trade deficit widening marginally to $27.5 billion. Also, the University of Michigan consumer sentiment index for September, scheduled for release Friday, is expected to rise to 67.0.
Intel's (INTC) CEO was more optimistic on business demand improving into 2010 in an Financial Times interview, supporting tech stocks, while Apple's (AAPL) price target was boosted sharply by Societe Generale.
In economic news Friday, U.S. nonfarm payrolls fell 216,000 in August from a revised -276,000 in July, while June's decline of 443,000 was revised to -463,000 for a net 49,000 downward revision. The unemployment rate rose to 9.7% from 9.4%. The workweek was steady at 33.1. Average hourly earnings rose 0.3% after a revised 0.3% increase in July (was 0.2%).
The Associated Press reported Friday the finance ministers and central bank officials from rich and developing countries representing 80% of world economic output are convening amid mounting signs of an economic recovery. Japan, Germany, France and Australia all recorded growth in the second quarter while Britain is widely expected to do so in the third quarter. They are expected to agree on an ongoing commitment to boosting the economy, but there is friction over when exactly to scale back stimulus efforts. Despite the nascent signs of recovery, fears remain that curtailing government spending and monetary stimulus via low interest rates and money supply boosts too soon could result in a "double dip" recession.
European countries made a concerted push to put the thorny issue of bankers' pay and bonuses at the top of the agenda The initiative has received a lukewarm response from the United States, which instead wants to start talks on a new international accord to increase banks' capital reserves.
U.S. Treasury Secretary Timothy Geithner has also downplayed the talks to be held today and Saturday as a "stock-taking meeting," on the road to the leaders' meeting in Pittsburgh later this month, "not a new-initiatives meeting."
Reuters reported China will use yuan, not dollars, to buy up to $50 billion in International Monetary Fund-issued bonds, according to an agreement between the People's Bank of China and the IMF. The expectation had been that China would use dollars to buy the bonds, which are denominated in Special Drawing Rights (SDR), the IMF's unit of account, as it seeks to diversify its vast foreign exchange holdings. But the agreement stated that China will pay the IMF up to 341.2 billion yuan ($50 billion), also known as renminbi, for the SDR bonds, based on the Aug. 25 exchange rate.
Reuters reported IMF Managing Director Dominique Strauss-Kahn said the global economy is emerging from a deep downturn but the recovery will be sluggish and unwinding stimulus measures too soon could derail an upswing.
Among companies in the news Friday, H&R Block (HRB) posted a first-quarter loss from continuing operations of $0.39, vs. a $0.39 loss one year earlier, despite a 1.3% revenue rise. The company continues to see fiscal 2010 EPS from continuing operations of $1.60-$1.80.
Quiksilver (ZQK) posted third-quarter pro forma EPS from continuing operations of $0.03, vs. $0.25 one year earlier, on an 11% revenue decline. The company sees fourth-quarter revenue down in the mid-teens on a percentage basis compared to the same quarter a year ago. It expects to incur a loss per share on a diluted basis in the mid-single-digit range. Quiksilver also said that longer term visibility into revenues and earnings remains limited due to global economic conditions.
Cooper Companies (COO) posted $0.54 third-quarter EPS (non-GAAP), vs. $0.39 one year earlier, on a 2% revenue rise. Wall Street was looking for $0.62 EPS. The company sees non-GAAP EPS of $0.66-$0.68 in the fourth quarter and $2.27-$2.29 in fiscal 2009. Wall Street was looking for fiscal 2009 EPS of $2.30.
Google (GOOG) announced that Kai-Fu Lee, president of Google Inc.'s China operations, is resigning from the company after working to establish the Internet giant as a formidable player in the country, according to a Wall Street Journal report.
Fannie Mae (FNM) received notice from the New York Stock Exchange that the company has regained compliance with the NYSE's minimum price standard for continued listing of its common stock.