US stocks rally on steady job data

Elizabeth Lazarowitz

NEW YORK: Stocks rallied on Friday as Wall Street cheered US jobs data that

signaled slowing US economic growth, lifting hopes that the Federal Reserve's

binge of interest-rate increases may be nearing an end.

The June employment numbers showed a dramatic slowdown in the pace of job

creation, which analysts said underscored the idea that the Fed's six rate hikes

of the past year have begun to take effect.

"It was positive for the markets because it gave the indication that the

economy is on a slowing growth track ... and that's what Wall Street wants to

see for now," said market strategist for Ehrenkrantz, King, Nussbaum, Inc.

Barry Hyman.

The technology-heavy Nasdaq composite index raced higher, closing above the

psychologically significant 4,000 level for the first time in two weeks. The

Nasdaq ended up 62.63 points, or 1.58 per cent, at 4,023.20.

The Dow Jones industrial average, meanwhile, climbed 154.51 points, or 1.47

per cent, to 10,635.98.

The broader Standard & Poor's 500 Index rose 22.23 points, or 1.53 per

cent, to finish at 1,478.90. The Wilshire 5,000 index, a gauge of nearly the

entire US stock market, jumped 201.96 points, or 1.48 per cent, to 13,849.18.

For the week, the Nasdaq rose 57 points or 1.44 per cent. For the year, the

Nasdaq is down just a little over 1 per cent, recovering from its steep drop in

April.

The Dow average advanced 188 points, or 1.80 per cent, for the week. For the

year, the Dow is down 7.50 per cent.

The S&P 500 Index added 24 points, or 1.67 per cent, for the week. For

the year, the S&P 500 is up 0.61 per cent.

Early Friday morning, the Labor Department reported that June payrolls

increased by a modest 11,000. The slim gain was explained this way: The addition

of 206,000 private-sector jobs was offset by the departure of 190,000 temporary

workers, who were working on the year 2000 Census.

Economists polled by Reuters had forecast a jump of 263,000 in non-farm

payroll jobs in June.

"The market is absolutely (thinking) that the likelihood of a rate

increase in August diminishes with every statistic that shows that the economy

is slowing to a hopefully more normalized 3.0 per cent," Hyman added.

The inflation-fighting Fed has repeatedly expressed concern about tight labor

market conditions, which they fear could put upward pressure on labor costs.

Investors, meanwhile, have grown increasingly nervous that rising credit

costs could bite into corporate profits. The Fed's policy-setting committee

meets to decide its next move on interest rates on August 22.

Semiconductor shares led the Nasdaq market higher for the second day in a

row, with Intel Corp., the world's largest chip maker, up 2-11/16 at 139-5/16.

The Philadelphia Semiconductor Index shot up 3.69 per cent.

Earlier in the week, jitters over earnings and a Wall Street brokerage's

downgrade of the semiconductor industry had battered technology stocks.

"The earnings disappointment earlier in the week set stocks up for a

trading lift, should the data be positive, and it was," said Dunvegan

Associates chief investment strategist AC Moore.

But the Nasdaq's cheer was dampened by e-business applications firm

BroadVision Inc., which fell 13-5/8 to 40. BroadVision shares fell after AMR

Corp. picked Art Technology Group over Broadvision as the technology provider

for the company's Web site.

Wireless telephone technology company Qualcomm also pulled the Nasdaq down.

Qualcomm shares fell 5-1/16 to 56-5/8 after the company announced South Korea's

three major telecom service providers were not in favor of its system for

third-generation mobile services.

Technology names helped buoy the Dow, with computer giant International

Business Machines Corp. gaining 2-15/16 to 104-11/16, while rival

Hewlett-Packard Co. climbed 6-3/8 to 124-3/4.

Investors were looking forward to next week, when corporate earnings season

gets under way, with Wall Street anticipating generally robust second-quarter

results.

"With at least a less onerous Fed and with most of the bad news out on

earnings disappointments ... these are wonderful ingredients for the stock

market," said market strategist for Loomis Sayles, Detroit, David Sowerby.

Despite Wall Street's positive reaction to the job data, it was too early to

celebrate, market analysts said, since the numbers also point to continued

upward wage pressure.

The Labor Department said the small increase in jobs sent the unemployment

rate down to 4.0 per cent from 4.1 per cent in May.

Average hourly wages, a closely watched figure, rose 0.4 per cent, in line

with expectations. An increase in hourly wages can signal acceleration in wage

pressure and a potential rise in inflation.

In the stock market, "there will be relief that the Fed is not pushed

hard toward tightening today," said senior economist at Primark Decision

Economics Pierre Ellis. "On the other hand, there will be concern that

earnings growth will suffer going forward because the economy is clearly slowing

and meanwhile, wage pressures may be building."

A poll conducted after the jobs report showed that more than two-thirds of

the nation's 29 primary dealers still see the Fed jacking up interest rates

modestly at the policy-making Federal Open Market Committee's meeting in August.

Wall Street will get more inflation data next week, which kicks off the

second-quarter earnings reporting season, with the release of reports on June

retail sales and inflation at the wholesale level.

(C) Reuters Limited 2000.