US stocks went from famine to feast this week with a mid-week swoon giving way to a big rally following Friday’s jobs report for last month.
The Dow Jones Industrial Average finished the week up 167.05 points (0.93 percent) at 18,191.11, while the broad-based S&P 500 advanced 7.81 points (0.37 percent) to 2,116.1, less than two points below a record.
The tech-rich NASDAQ Composite Index slipped 1.84 points (0.04 percent) to 5,003.55.
Factors behind the weakness in the first part of the week included lackluster economic data. The US trade deficit in March jumped more than 40 percent to a six-year high, due in part to the strong dollar.
Analysts also cited worries about higher oil prices, as well as the continued logjam in talks between Greece and its creditors on a package to unlock bailout funds.
FED COMMENTS
Stocks also sold off after US Federal Reserve Chair Janet Yellen characterized US stock market valuations as “quite high” and said they pose “potential dangers” to financial stability.
Analysts said Yellen’s comments suggested the Fed is eager to raise ultra-low interest rates despite some disappointing economic data.
“She seems to be hinting that they’re going to have to raise rates one way or the other as long as the economy is growing at all,” FTN Financial chief economist Chris Low said.
However, US stocks rallied on Thursday and again on Friday after the US Department of Labor reported the US economy added a solid 223,000 jobs last month and unemployment fell to a seven-year low of 5.4 percent.
Kenjol Capital Management portfolio manager David Levy said the jobs figure came in at a “sweet spot” for Wall Street because it suggested the economy had turned a corner after a weak first quarter.
WEAK WAGE GROWTH
At the same time, the US labor market showed some signs of weakness, with wages barely growing and underemployment still elevated.
That suggested the Fed would not hasten its plan to raise interest rates, Levy said.
“Investors are breathing a sigh of relief,” Levy said on Friday afternoon.
In corporate news, fast-food chain McDonald’s Corp unveiled a long-awaited turnaround plan under new chief executive Steve Easterbrook, who reorganized the company’s international operations and announced plans to sell off more company-owned restaurants to franchisees.
However, McDonald’s shares fell after the plan was released.
A note from Morningstar called the plan “somewhat lacking” on menu details.
In merger news, Alexion Pharmaceuticals Inc announced another big deal in the drug business, saying it would buy Synageva BioPharma Corp for US$8.4 billion to create a bigger player in treatments for rare diseases.
Alibaba Group rallied after reporting a 45 percent gain in revenues to US$2.1 billion in the January-March quarter, though profits plunged by nearly half. The Chinese e-commerce giant named chief operating officer Daniel Zhang as chief executive, replacing Jonathan Lu.
Online listings and review site Yelp surged on reports it is considering selling itself, while shares of cloud computing company Salesforce.com lurched up and down on shifting reports on its possible acquisition by Microsoft Corp or another large tech player.
Cisco Systems Inc announced longstanding chief executive John Chambers would step down and be replaced by another company veteran, Chuck Robbins.
Cisco reports quarterly earnings next week. Dow member DuPont will also be in the news with an annual meeting that will consider activist fund Trian Fund Management’s efforts to win four board seats.
There are also a handful of economic reports, including US retail sales for last month.
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