Stocks Finish Higher on Job Growth

Next week brings data on the service sector, inflation, and jobless claims. Earnings from Alcoa and Yahoo! are also due

Stocks finished with substantial gains Friday after the March employment report showed significant job growth -- a long-awaited sign of economic health.

The Dow Jones industrial average added 97.26 points, or 0.94%, to 10,470.59. The broader Standard & Poor's 500-stock index gained 9.63 points, or 0.85%, to 1,141.80. The tech-heavy Nasdaq composite index rose 42.16 points, or 2.09%, to 2,057.17.

In economic news Friday, a report on payrolls for March showed a jump of 308,000 new jobs for the month, beating economists' forecasts and reflecting the fastest monthly growth in four years. On average the markets were predicting a rise of 123,000 new jobs.

The unemployment rate rose to 5.7% from a two-year low of 5.6% in January and February. Jobs in the manufacturing sector did not rise, but factory payrolls were unchanged in March, breaking 43 consecutive monthly declines. The Labor Dept. report said that after revisions, companies added 205,000 jobs in January and February, more than the 118,000 previously reported.

"The Bush folks must be breathing a sigh of relief," writes Sherry Cooper, global economic strategist at BMO Financial Group. "The jobs number was not only better than expected, it was downright strong. Most of the net new jobs were in the service sector, as construction employment rebounded and manufacturing jobs remained unchanged. The report "points to a widespread bounce in job growth," Cooper says.

The strong jobs data sent shares in temporary employment concerns higher while home improvement retailers and homebuilders dipped on the specter of rising interest rates.

In company news, Dow member Walt Disney Co. (DIS ) CEO Michael Eisner said the company's operations are performing in line with forecasts made at recent meetings.

In tech news, Sun Microsystems (SUNW ) reduced previous guidance. It sees a loss of 6 cents to 8 cents per share, excluding items, for its fiscal third quarter, on revenues of $2.65 billion. The company will also cut 3,300 jobs and take a related charge of $475 million over the next several quarters.

Separately, Sun also appointed named Jonathan Schwartz as chief operating officer and president. The company also said it signed a licensing deal with Microsoft (MSFT ).

In a surprising twist, the judge in the trial of former executives of Tyco International (TYC ) declared a mistrial Friday amid intense outside scrutiny of one of the jurors. Mark Swartz, the company's former CFO, and Dennis Kozlowski, its former CEO, were accused of looting the company of $600 million. On Thursday, Dow Jones (DJ ) said it will make its first changes since 1999 to the blue-chip Dow Jones industrial average. Effective Apr. 8, American International Group (AIG ), Pfizer (PFE ), and Verizon Communications (VZ ) will replace AT&T Corp. (T ), Eastman Kodak (EK ), and International Paper Co. (IP ).

Next week, investors get the latest reports on the non-manufacturing ISM index, mortgage applications, initial jobless claims, and the producer price index. Stock and bond markets are closed Friday, Apr. 9, for the Good Friday holiday.

Looking ahead to next week's earnings calendar, Alcoa (AA ) and Ruby Tuesday (RI ) report early in the week. Others on the docket include Constellation Brands (STZ ), Genentech (DNA ), Yahoo! (YHOO ), Abbott Laboratories (ABT ), SunTrust (STI ) and Rite Aid (RAD )

Treasury Market

Treasuries finished sharply lower amid a much better than expected employment report. With jobs increasing, analysts expect the Federal Reserve will come closer to raising benchmark interest rates. Traders are increasingly worried that foreign buyers of U.S. government bonds will turn to stocks instead of safer bond investments.

World Markets

European stocks finished higher on the heels of the jobs report in the U.S. London's Financial Times-Stock Exchange 100 index gained 54.90 points, or 1.24%, to 4,465.60, led by strength in British Airways and mining stocks.

Germany's DAX index gained 82.75 points, or 2.11%, to 4,007.60. In Paris, the CAC 40 increased 69.93 points, or 1.91%, to 3,739.91.

In Asia, markets finished higher. The Nikkei 225 index added 132.53 points, or 1.13%, to 11,815.95, amid a rise in U.S. stocks following a solid manufacturing report Thursday. The data fueled confidence in the Japanese economic recovery. In Hong Kong, the Hang Seng index gained 55.51 points, or 0.44%, to 12,731.76.

Before it's here, it's on the Bloomberg Terminal.