Wall Street capped a stellar week by extending its rally for a ninth straight session, as a better-than-expected US employment report boosted stocks and gave investors hope that the economy was strengthening. The week's gains were among the strongest of the year, with the Dow Jones industrials having their best week since early last year.
The 337,000 jobs created in October were nearly double what Wall Street expected. The strength of the Labor Department figures, which included upward revisions of the August and September figures as well, allowed investors to overlook an unexpected jump in the unemployment rate to 5.5 percent, up from 5.4 percent in September.
However, some investors feared that the increase in wages flowing into the economy could trigger inflation. That prompted a selloff on the bond market, with the yield on 10-year notes reaching 4.18 percent. Investors grew increasingly certain that the Federal Reserve would raise interest rates in both its November and December meetings to combat the inflationary pressure.
"You absolutely have to have Fed action both months now," said Doug Sandler, chief equity strategist at Wachovia Securities. "The saving grace for the economy this year has been no inflation, and a big component of that is wages. When there are more wages, inflation becomes a factor. We haven't seen it yet, but it becomes a concern that the Fed will have to face."
The Dow Jones industrial average rose 72.78, or 0.71 percent, to 10,387.54, the Dow's highest closing level since June 30.
Broader stock indicators were moderately higher. The Standard & Poor's 500 index was up 4.50, or 0.39 percent, at 1,166.17, surpassing Thursday's mark, which had been the highest close for the index since March 19, 2002.
The NASDAQ composite index gained 15.31, or 0.76 percent, to 2,038.94, it's best close since June 30.
Since Oct. 25, the Dow has been up in eight of the last nine sessions, while the S&P 500 and NASDAQ enjoyed nine straight gains, buoyed by lower oil prices, US President George W. Bush's election victory and the jobs report. For the week, the Dow gained 3.59 percent -- it's best week since March 25 last year -- while the S&P rose 3.18 percent and the NASDAQ climbed 3.24 percent.
The monthly payroll report is considered to be a key barometer of economic growth, and had been lagging for months as the economy's summer "soft patch" lingered into the third quarter. Now, with payrolls on the rise and the uncertainty of the presidential elections over, investors who had been staying out of the market appeared to be clamoring to get back in.
Some analysts downplayed the question of inflation.
"I don't want to say it's clear sailing to the end of the year, but the seas look pretty calm," said Robert MacIntosh, chief economist for Eaton Vance Corp. "For now, we're not seeing wages become an inflationary issue, and the Fed should be able to manage that."
Investors were further pleased by crude oil futures, which -- for now -- appear to have stabilized below US$50 per barrel. A barrel of light crude for December delivery was quoted at US$49.61, up US$0.79, on the New York Mercantile Exchange.
Even the technology sector, which had risen at a much slower rate during this rally, saw good news from semiconductor maker nVidia Corp. The maker of graphics chipsets saw its profits quadruple in the third quarter as the company enjoyed brisk sales of its latest desktop computer chips. Shares of nVidia, which surpassed Wall Street profit expectations by US$0.06 per share, surged US$2.23, or 14.5 percent, to US$17.64.