Wall Street barreled higher on Friday, sending the Dow Jones industrials up 138 points to a new six-year high after a report of modest job growth bolstered hopes that the Federal Reserve will end its interest rates hikes. All three major indexes finished the week with gains.
Investors saw a slowdown in employment growth last month as the latest sign of a softening economy, a reason for the Fed to stop raising interest rates. That countered worries over rising wages, which followed an upswing in employers' labor costs on Thursday.
Jack Caffrey, equities strategist for JP Morgan Private Bank, said the market appeared to be focusing on recent positive data instead of considering the long-term consequences of why the Fed would stop boosting rates -- because economic growth has slowed enough to contain inflation.
"People are taking the weaker job creation, the stability in the unemployment rate and the uptick in jobless claims and spinning that into a hope the Fed will move to the sideline sooner than later," Caffrey said. "It's almost a hope-for-relief rally instead of a 'the Fed is done, things are slowing down' mentality."
Falling oil prices also helped stocks to their gains, although some believe higher gasoline prices will pressure consumer spending and keep the economy from overheating.
According to preliminary calculations, the Dow rose 138.88, or 1.21 percent, to 11,577.74, its best showing since the Dow reached its all-time high of 11,722.98 on Jan. 14, 2000. The Dow is now just 145.54 away from setting a new record.
Broader stock indicators were higher. The Standard & Poor's 500 index gained 13.51, or 1.03 percent, to 1,325.76, its highest level since Feb. 15, 2001; the NASDAQ composite index advanced 18.67, or 0.8 percent, to 2,342.57. The S&P remains 13.2 percent away from its all-time high, while the NASDAQ is 53.6 percent lower than its 2000 record.
Advancing issues led decliners by a robust 3 to 1 margin on the New York Stock Exchange, where volume of 1.69 billion shares trailed behind the 1.75 billion shares traded on Thursday.
The light trading volume was indicative of the market's ongoing uncertainty about interest rates and whether stocks can press past multiyear highs, said Christopher Piros, director of investment research for Prudential's Strategic Investment Research Group. Meanwhile, the jobs data left the inflation riddle unanswered, he said.
"We are at a point where inflation expectations are still rising, and the Fed is faced with a dilemma of whether they've done enough to cap inflation, but not enough to roll over the economy," Piros said. "I haven't seen real signs of a pickup in core inflation, although it's been ticking up slowly."
Evidence of a tapering economy in this week's data fed investors' optimism that the Fed will soon halt its rate increases, giving the major indexes a strong boost. For the week, the Dow was up 1.85 percent, the S&P climbed 1.16 percent and the NASDAQ rose 0.86 percent.
The Labor Department said US employers added 138,000 jobs last month, far less than estimates of a 200,000 gain. Average hourly earnings meanwhile jumped 0.5 percent, above the consensus target of 0.3 percent. The unemployment rate held steady at 4.7 percent.
Bonds recouped recent losses, with the yield on the 10-year Treasury note falling to 5.11 percent from 5.15 percent late on Thursday. The US dollar sank against the Japanese yen and was flat against European currencies, while gold prices topped US$680 per ounce.