Stocks finished higher Friday after a reading on employment came in much stronger than expected.
The Dow Jones industrial average rose 84.5 points, or 0.89%, to 9,572.31. The broader Standard & Poor's 500 index was up 9.61 points, or 0.94%, to 1,029.85.
Friday's big winner was the tech-heavy Nasdaq composite, which jumped 44.35 points, or 2.42%, to 1,880.57, thanks to strength in semiconductor and Internet stocks.
Signs that the labor market might be improving put bulls in charge on Friday, says Standard & Poor's MarketScope. Nonfarm payrolls in September rose 57,000, the first increase since January, and beat consensus expectations for a 25,000 decline. August payrolls were revised to a 41,000 decline from a decline of 93,000 previously.
In the Labor Dept.'s household survey, the unemployment rate held steady at 6.1%. September hourly earnings fell 0.1%, vs. August's gain of 0.2%. And hours worked held steady at 33.7.
"Friday's data acted as a major boon for bulls, who had been hoping for some time that the 'other shoe' of employment would drop to confirm the sustainability of the current economic recovery," says economic research outfit MMS International. "The action sets a near-term tone and direction for stocks decidedly higher with the major [indexes] now likely to test their old highs and surpass in the coming week."
Wrote Standard & Poor's economists David Wyss and Rick MacDonald in a report Friday: "Although one month does not make a trend, this is the first increase since January, and some excitement seems called for."
In other economic news, the Institute for Supply Management Services index dipped to 63.3 in September from 65.1, in line with expectations for some slowing in this sector's growth. The report still reflects a very healthy services sector, says MMS.
There is little of interest on the economic calendar in the first half of next week. Inventory figures will be released on Wednesday, while weekly jobless claims data arrive on Thursday, before Friday's producer price index and trade data come out.
Instead, investors may pay more attention to third-quarter earnings reports, which start trickling in next week. Among the big-name companies expected to report results: PepsiCo (PEP ) and Alcoa (AA ) on Tuesday; and Yahoo (YHOO ), Costco Wholesale (COST ), and Genentech (DNA ) on Wednesday. Abbott Laboratories (ABT ) and Juniper Networks (JNPR ) are set to release results on Thursday, followed by General Electric (GE ) on Friday (Oct. 10).
On Friday, shares of employment services providers, such as Monster Worldwide (MNST ), were riding high on the news that U.S. employers added new jobs in September for the first time in eight months.
Airline stocks climbed, after Bear Stearns upgraded AMR Corp. (AMR ) to outperform from peer perform, and raised earnings estimates on major airline carriers.
Among other stocks on the move, Siebel Systems (SEBL ) shares rose, despite news that the company warned that third-quarter results will be below expectations. Siebel sees third-quarter revenues of $320 million to $322 million and operating EPS of 3 cents. (Siebel expects a loss, including charges, of about 12 cents per share.) The company will book $118 million in restructuring and debt retirement charges in the quarter. Citigroup upgraded the stock to buy on the belief that much of the downside risk for results is now removed.
Shares of Adtran (ADTN ) shot up after the communications equipment maker preannounced better than expected third-quarter and fourth-quarter results. Adtran cited sharply higher shipments of DSLAMS, improving business climate in its Enterprise Networks unit, and market share gains in end-user markets.
Starbucks (SBUX ) shares rose after the coffee-house chain said sales at stores open at least a year were up 9% in September, while total store sales rose 25% to $422 million.
The Dow got an added lift after Lehman Brothers upgraded shares of 3M (MMM ), a member of the 30-stock average.
DOV Pharmaceutical (DOVP ) shares fell after the company says the FDA placed the start of a Phase III pivotal trial of ocinaplon, DOV's novel anti-anxiety product candidate, on hold. The FDA requested additional safety information on the drug.
Payrolls Friday proved a tough ride for Treasuries, which tumbled out of the saddle and could not get back up after the positive headline print, says MMS International. The benchmark 10-year note yield rose 18 basis points to 4.19%. The selling in the last two sessions came after hedge funds failed to trigger a mortgage-related duration buying spree earlier in the week, says MMS International.
Contrary to expectations of a large preliminary upward benchmark revisions, the Labor Dept. said they may lower payrolls by 145,000 in the year ended March, 2003.
Prices of Fed funds futures, a trading vehicle for pros to bet on future interest rate moves, dropped as the market reassessed its outlook for the Federal Reserve move to a tighter policy, says MMS International.
European stock markets were higher. London's Financial Times-Stock Exchange 100 index gained 64.9 points, or 1.54%, to 4,274. Signs of strength in the U.S labor market bolstered hopes that world economic conditions would be improving.
In Paris, the CAC 40 was up 103.42 points, or 3.24%, to 3,296.36. Germany's DAX index jumped 142.36 points, or 4.34%, to 3,419.
Asian markets finished higher Friday. In Japan, the Nikkei 225 index gained 115.76 points, or 1.09%, to 10,709.29. The market was rather sluggish in the morning, but rebounded gradually in the afternoon, led by some blue chips and cyclical stocks.
In Hong Kong, the Hang Seng index rose 62.60 points, or 0.54%, to 11,608.72.