Economic data boost stocks
Signs of strength in the job market, economy overall, give stocks a lift.
March 8, 2002: 5:09 p.m. ET
By Staff Writer Alexandra Twin
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NEW YORK (CNN/Money) - Stocks surged Friday, ending a dramatic week on a high note after a report showing the caboose in any economic recovery -- the labor market -- may finally be coming on board and showing some stability.
Although stocks were unable to hold on to their highs by the close Friday, the data showing an end to six months of job cuts seemed to inspire investors to extend a volatile, but constant rally on the week that saw the Nasdaq composite rise 7 percent and the Dow Jones industrial average add just under 2 percent.
On Friday, the Nasdaq composite rose 48.04 to 1,929.67. The Standard & Poor's 500 index rose 6.77 to 1,164.31. The Dow Jones industrial average added 47.12 to 10,572.49, its highest close in 7 1/2 months.
"We saw some profit-taking late in the day (Friday), but it's been a great week. People are feeling more comfortable. They're feeling better about the stock market," Mike Murphy, head of equity trading at Wachovia Securities told CNNfn's Street Sweep.
Stocks rallied Monday and Wednesday, scaling back and consolidating those gains Tuesday and Thursday. Friday's action built on the earlier rally, with the jobs data topping off more than a week of solid economic reports, including signs of strength in the manufacturing and services sectors of the economy.
Whether it's sustainable in the week ahead is debatable.
"We're going to continue to see short-term volatility. But that isn't necessarily bad, as it means markets are trying to build a base," Peter Kenny, New York Stock Exchange Member of Kenny & Co. told CNNfn's Market Call.
The U.S. unemployment rate fell to 5.5 percent in February from 5.6 percent in January, the Labor Department said. Employers added 66,000 jobs to payrolls, compared with a revised loss of 126,000 jobs the month earlier. Economists surveyed by Briefing.com were expecting unemployment to rise to 5.8 percent and payrolls to be basically flat.
Although a number of analysts suggest the rise in payrolls may be a seasonal factor, and therefore to be taken with a grain of salt, many were nonetheless encouraged and pleasantly surprised by the results.
"This is adding to the evidence that the economy is going to pick up and I think that we're going to keep seeing a better job picture," James Glassman, U.S. economist at J.P. Morgan, told CNNfn's Market Call.
The unemployment news came one day after Federal Reserve Chairman Alan Greenspan told a Senate panel that an economic recovery is "well under way," although challenges remain.
Treasury prices closed sharply lower, with the 10-year note yielding 5.32 percent. Light crude oil futures rose 4 cents to $23.84 a barrel in New York. Gold futures traded lower in Chicago.
In global trade, European bourses closed higher. Asian markets closed mixed Friday. The dollar was stronger against the euro and yen.
Market breadth was positive. On the New York Stock Exchange, advancers edged decliners 8-to-7 as 1.40 billion shares traded. On the Nasdaq, winners topped losers 11-to-6 as 2.04 billion shares changed hands.
Tech names rise
Early strong gains on the Dow seemed to disintegrate by late afternoon, with only IBM (IBM: up $1.38 to $105.09, Research, Estimates) and Caterpillar (CAT: up $0.81 to $59.33, Research, Estimates) making strong gains.
Aerospace and defense maker Boeing (BA: up $0.92 to $49.40, Research, Estimates) will be part of a $4 billion to $5 billion U.S. army project in which it will develop hardware and software over the next five years, along with Science Application International. It also said it will take a $1.4 billion to $1.9 billion first-quarter after-tax charge due to accounting changes.
Sun Microsystems (SUNW: up $1.17 to $10.00, Research, Estimates), the largest maker of Unix servers, reaffirmed that it is on track to meet its financial goals for the quarter, provided that order rates in the next few weeks perform as expected. On Friday, Sun said it was suing Microsoft for anti-competitive practices.
Intel (INTC: up $1.19 to $34.17, Research, Estimates), the No. 1 chipmaker, narrowed its targets for sales and profitability, saying both numbers should hit the high end of the ranges previously forecast.
UBS Warburg raised its 12-month price target on semiconductor equipment maker Applied Materials (AMAT: up $2.17 to $53.53, Research, Estimates).
Biogen (BGEN: down $4.75 to $51.65, Research, Estimates) was pressured after Serono's (SRA: up $2.62 to $22.21, Research, Estimates) multiple sclerosis drug won U.S. Food and Drug Administration approval, threatening the company's own treatment, Avonex.
Merrill Lynch issued some negative notes on a few optical networking issues. The firm downgraded JDS Uniphase (JDSU: down $0.04 to $6.37, Research, Estimates) to "near-term neutral" from "buy," and restarted coverage on Ciena (CIEN: down $0.43 to $9.27, Research, Estimates) with a "near-term reduce/sell" and a "long-term neutral" rating.
Brokerages were active on a pair of mixed analyst notes. Merrill Lynch issued a positive note, highlighting such names as J.P. Morgan Chase (JPM: up $0.69 to $34.74, Research, Estimates) and Morgan Stanley (MWD: up $1.64 to $56.86, Research, Estimates), while Salomon Smith Barney downgraded a number of names including Merrill Lynch (MER: up $0.54 to $53.33, Research, Estimates).
Kmart (KM: up $0.05 to $1.29, Research, Estimates) said it is slashing 22,000 jobs and closing 284 stores as part of its restructuring under Chapter 11 bankruptcy.
Krispy Kreme Doughnuts (KKD: up $0.77 to $40.32, Research, Estimates) said its fourth-quarter profit rose to 14 cents per diluted share from 8 cents a year earlier and above forecasts.
"I think pessimism has been replaced by cautious optimism. Buying today (Friday) is not just in the Suns and Intels, but in a pretty broad-based group of stocks," Hedi Reynolds, head of Nasdaq trading at Morgan Keegan, told CNNfn's Halftime Report.
Goldman's Cohen reaffirms
Adding further words of encouragement Friday was noted Goldman Sachs chief investment strategist Abby Joseph Cohen, who reiterated her year-end targets for the three major indexes.
"Data suggest that economic activity has bottomed and that the worst is now being reported for corporate profits," Cohen wrote in a morning note to clients. "As such, stock price gains are expected to continue, supported by improvements in corporate performance and mild-mannered inflation and interest rates."
In other news, the Senate has approved the scaled-down economic stimulus package that the House passed Thursday. The package calls for an extension of unemployment benefits by 13 weeks and some tax breaks for business owners, among other things. President Bush said Friday that he will sign the bill. 
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