As Interest Rates Sink, Dow Rises
Some stock market indicators rose to record levels Friday, as Wall Street bounced back sharply from an afternoon pullback. Stocks advanced as interest rates sank in the bond market on a fresh sign that inflationary pressures have remained tame.
The Dow Jones industrial average rose 82.74 to close at 6,855.80, briefly dipping into negative territory after surrendering an early 95-point gain. The barometer of 30 big U.S. companies is now only about 26 points shy of its all-time best close of 6883.90, set Jan. 21. For the week, the Dow gained 42.71 points.
Broader measures also bounced back from an afternoon stumble to boost the Standard & Poor’s 500 list and the New York Stock Exchange composite index, both dominated by larger companies, to new highs. The Nasdaq market also posted strong gains, with bellwether technology shares starting to rebound from a two-day barrage of profit-taking.
Investors had grown skittish ahead of Friday’s key report on January employment, worrying about the inflationary threat of another big jump in wages, which make up about two-thirds of a product’s price.
But the Labor Department report helped allay those fears, with average hourly pay edging up just 1 cent to $12.06, a slowdown after the steep 15-cent increase over the previous two months.
Still, the increase in payroll jobs - 271,000 - was the best since August and a little stronger than anticipated. Economists worry that low unemployment will force businesses to compete for workers by raising wages, forcing prices higher in the nation’s stores. Friday morning’s report said the nation’s unemployment rate crept up to 5.4 percent in January, up from 5.3 percent in December, but still near a seven-year low.
Earlier this week, the Federal Reserve passed up an opportunity to raise interest rates, apparently convinced the economy has slowed enough to contain inflation, which makes fixed-income investments such as bonds less attractive.
Stocks jumped in the morning as bonds rallied, dropping the yield on the 30-year Treasury bond - a key determinant of borrowing costs - as low as 6.66 percent from late Thursday’s 6.75 percent.
But bonds began to pull back in the early afternoon. The widely watched long-bond yield rose to 6.74 percent, spurring some profit-taking in the stock market, as the U.S. dollar sank on remarks by U.S. Treasury Secretary Robert Rubin.
Advancing issues outnumbered decliners by a 7-to-4 margin on the NYSE, where volume totaled 538.62 million shares as of 4 p.m., up from Thursday’s pace.
The S&P 500 rose 9.41 to 789.56, and the NYSE composite index rose 3.91 to 413.80, with both measures breaking Tuesday’s records.
The Nasdaq composite index was up 11.31 to 1,357.71, and the American Stock Exchange composite index rose 1.58 to 586.61.
Overseas, Tokyo’s Nikkei stock average fell 1.0 percent, Frankfurt’s DAX index rose 1.1 percent and London’s FT-SE 100 rose 1.0 percent to a new high.