Rate-cut hopes support stocks

NEW YORK (CNNMoney.com) -- Stocks were mostly higher Friday morning after a weak employment report raised expectations for the Federal Reserve to keep slashing interest rates in the near term.

Almost an hour into the session, the Dow Jones industrial average (INDU) held close to breakeven. The broader Standard & Poor's 500 (SPX) index inched higher, and the Nasdaq composite (COMP) gained 0.5%.

Employers cut 63,000 jobs in February, the biggest monthly cut in five years. Employers were expected to add 25,000 to their payrolls, according to a Briefing.com survey of economists. January's job loss was revised to 22,000.

The unemployment rate, generated by a separate survey, fell to 4.8% from 4.9%, versus forecasts for a rise to 5%. But the drop was a result of less people being in the workforce. Average hourly earnings, the report's inflation component, rose 0.3%, as expected, after rising a revised 0.3% in the previous month. (Full story).

The report is the latest indication that the economy is headed for a recession, if it isn't in one already.

But stocks were little changed as investors bet that the weak labor market would spur the Fed to aggressively cut interest rates at its next meeting on March 18.

Separately, the Fed said it was taking more steps to try and ease the liquidity crunch by increasing the amount of money it would make available to banks in its March auctions. The Fed will now make $100 billion available over the two auctions, up from the $60 billion originally planned. The Fed has undertaken a series of auctions to get banks the cash they need to make loans.

Meanwhile, on Capitol Hill, a hearing was underway to discuss the February jobs report. A separate hearing was underway on executive compensation, focusing on the link between pay packages and the mortgage crisis.

Stocks tanked and bonds rallied Thursday as investors eyed the latest wave of credit market woes and opted to dump equities and scoop up relatively safer government debt.

Other markets. U.S. light crude oil for April delivery fell $1.32 to $104.15 a barrel on the New York Mercantile Exchange after ending the previous session at a record high of $105.47.

In currency trading, the dollar touching a fresh record low against the euro on the weak jobs report. The greenback fell to its lowest level versus the yen in three years.

COMEX gold for April delivery fell $5.30 to $971.80 an ounce. Gold prices, along with other dollar-traded commodities, have surged in response to the weak greenback. But after a big rally, prices have retreated for the last two sessions.

Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.53% from 3.58% late Thursday as investors sought the relatively safer-haven of government debt. Bond prices and yields move in opposite directions.