Wall Street capped a huge week with a sharp advance Friday after the government's employment report for September and its revision of August's data cooled the market's fears of a recession.
The Standard & Poor's 500 index, the measure most closely followed by market watchers, reached a new closing high.
The Labor Department's report that employers added 110,000 jobs in September — essentially what analysts had expected — reassured Wall Street that the job market wasn't pulling back sharply as was feared a month ago.
Though the data appeared to lessen the likelihood of an interest rate cut when the Federal Reserve meets Oct. 30-31, investors were relieved that the economy doesn't appear headed for a precipitous slowdown.
Strength this year in the job market amid a housing downturn and tighter credit conditions has been an important pillar for the economy. With consumer spending accounting for about two-thirds of U.S. economic activity, investors are eager for workers to continue to collect their paychecks.
Much of Wall Street's collective exhale Friday owed to a revision in August payrolls, which were updated to show a gain of 89,000 jobs compared with an earlier estimate of loss of 4,000 jobs. The release of the August figure — when economists had predicted a rise — sent the Dow down nearly 250 points in a single session and, market watchers say, played a role in the Fed's decision to cut its key interest rate by a larger-than-expected half-percentage point last month.
"We're not seeing a weakening of the labor market. There's no indication that the wheels are falling off," said T.J. Marta, economic strategist at RBC Capital Markets. He contends that while the employment figures make it less likely the Fed will cut rates this month, many on Wall Street were relieved to see the economy forging ahead.
"It looks bad compared with the rip-roaring days in the housing sector but this is called normalcy."
The Dow Jones industrial average rose 91.70, or 0.7%, to 14,066.01. The blue chip index set a new intraday trading high of 14,124.54, topping a high of 14,115.51 set Monday, when the index also saw a record close of 14,087.55.
Broader stock indicators also jumped. The S&P 500 index rose 14.75, or 1.0%, to 1557.59. The advance put the S&P 500 ahead of the previous record close of 1553.08, which occurred July 19 before stocks began a broad retrenchment amid concerns about credit, housing and the overall economy.
The S&P 500, which is the basis of many mutual funds and other investments and used as a benchmark for others, also set a fresh intraday trading high of 1561.91, topping a July 16 high of 1555.90.
The technology-dominated Nasdaq composite index showed bigger gains, rising 46.75, or 1.7%, to 2780.32.
Likewise, the Russell 2000 index of smaller companies rose 15.71, or 1.9%, to 844.86.
The gains left stocks sharply higher for the week. The Dow added 1.2%, while the S&P 500 2.0% and the Nasdaq advanced 2.9%. The Russell 2000 posted the biggest gains, however, jumping 4.9%.
Bond prices fell sharply as investors interpreted the jobs data as evidence against a rate cut. The yield on the 10-year Treasury note, which moves opposite its price, climbed to 4.64% from 4.53% late Thursday.
The stock market's advance was reminiscent of a big rally Monday in which the Dow first moved back above 14,000 after a pullback of several months. Comments from Citigroup that its business could rebound in the current quarter calmed concerns about credit tightness. Investors then gave back gains in subsequent sessions as they awaited the employment reading.
While employment appears to be holding up — the unemployment rate ticked up to 4.7% from 4.6% in August — Wall Street was also forced to examine the ramifications of credit market tightness and a slumping housing market on the banking sector. Merrill Lynch warned of a loss in the third quarter, and Washington Mutual forecast sharply lower profit due to problems stemming from turmoil in the mortgage market.
Merrill rose $1.89, or 2.5%, to $76.67, while Washington Mutual rose 79 cents, or 2.2%, to $36.07. Many investors expect the financial institutions' businesses will return to move normal levels starting in the current quarter.
Part of the financial upheaval that has hurt some financial houses has also pulled the dollar down sharply in recent weeks along with the Fed's last rate cut. With the employment reading still leaving room for a rate cut in some investors' eyes, the dollar gave up its earlier advance against other major currencies, leaving the greenback mixed. Lower interest rates would make the dollar a less attractive investment.
Meanwhile, gold prices rose and light, sweet crude settled down 22 cents at $81.22 per barrel on the New York Mercantile Exchange.
Fed funds futures are pricing in one rate cut of a quarter percentage point by the end of the year — signaling the Fed would likely act at either its October or December meetings.
"There is not enough ammunition for another ease in October," Marta said, pointing to decent economic readings seen in recent weeks. "Maybe the Fed really had it right because they talked about forestalling economic fallout from the financial crisis," he said of the reasoning behind last month's cut. "What we're seeing is the economic data isn't that bad — it's a moderate expansion."
"It's not like the economy is going gangbusters here but the reason the Fed tightened up through mid-2006 was to slow this economy down without breaking it and I think the employment data we've seen suggest they did a pretty darn good job of that."
In corporate news, aluminum maker and Dow component Alcoa said Thursday it expects to book charges of $845 million on the planned sale of its packaging and consumer products businesses. Alcoa, which rose $1.13, or 3%, to $38.79, also said it plans to restructure its electrical and electronic solutions segment.
BlackBerry maker Research In Motion rose $12.83, or 12.8%, to $113.37 after reporting its profit and revenue more than doubled in the second quarter on strong growth in its subscriber base. Results were in line with analyst expectations.
Advancing issues outnumbered decliners by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.26 billion shares compared with 1.1 billion traded Thursday.
Overseas, European markets advanced following the U.S. jobs report. Britain's FTSE 100 finished up 0.7%, Germany's DAX index rose 0.7%, while France's CAC-40 rose 0.7%. In Asia, Japan's Nikkei stock average closed down 0.2% and Hong Kong's Hang Seng index gained 3.2%.