Hopeful Close Eases Dow Fears
Stocks rallied late Friday as another strong day in the battered technology sector helped overshadow worrisome signs on inflation and interest rates, bringing a painful week to a hopeful close.
The Dow Jones industrial average, which had lost 400 points in five sessions coming into Friday, erased a 72-point morning deficit and then rose steadily through the afternoon to close at 6,526.07, a gain of 48.72.
Most broad-market measures also turned higher in the afternoon despite an extremely weak bond market, where interest rates jumped to a seven-month high after a key economic report revealed more inflationary pressures.
Analysts said the sudden strength among bellwether technology shares, which boosted the beleaguered Nasdaq market to a sizable gain for the second straight session, helped instill some confidence in jittery investors.
“It’s a real emotional market. What we saw late today was some good old fashion bargain hunting, first in technology, and then the rest of the market followed,” said Bob Dickey, managing director of technical analysis at Dain Bosworth in Minneapolis. He noted that investors may also have been relieved that there are no major economic reports due for a week.
Even with the week’s encouraging finale, few analysts were ready to declare an end to the market’s correction, a term used to describe a pullback of at least 10 percent.
The Dow trimmed the week’s loss to 214.52 points, but has still tumbled nearly 560 points, or almost 8 percent, from its all-time high it set less than a month ago.
Before Friday’s open, interest rates soared in the bond market amid news that the average hourly wage rose in March as the nation’s unemployment rate fell for the second consecutive month.
The 5.2 percent unemployment rate reported by the Labor Department was the lowest in five months and another sign of the economy’s brisk, and possibly inflationary, growth. Economists have been concerned that continued strong demand for workers will force companies to pay higher wages and then raise prices to compensate.
Last week, the Federal Reserve moved to pre-empt a resurgence of inflation by nudging one of its key lending rates higher to slow the pace of borrowing and spending. But many investors are worried that the central bank will boost interest rates repeatedly if economic trends don’t begin to moderate.
As bond prices fell today, the yield on the 30-year Treasury bond - a key determinant of consumer and company borrowing costs - rose to nearly 7.16 percent before settling at about 7.12 percent, the highest since September.
The recent concerns about rising interest rates at the Fed and the bond market have spurred a sharp downturn in the stock market over the past two weeks. Even with its gain on Friday, the Dow is still about 560 points, or almost 8 percent, below its all-time high at 7,085.16, which it set less than a month ago.