Drop in US jobless rate props up Wall Street

Stocks on Wall Street hit their highest levels of the year after a report published by the US Labor Department suggested the US economy may have seen the worst of the crisis, with the unemployment rate dropping slightly in July.


AFP - US stocks surged Friday to their best levels of the year after a much-awaited July jobs report was better than expected, signaling a likely turnaround in the long and painful recession.

The Dow Jones Industrial Average vaulted 113.81 points (1.23 percent) to end at 9,370.07, its highest level since November 4.

The tech-heavy Nasdaq composite leapt 27.09 points (1.37 percent) to 2,000.25.

The Standard & Poor's 500 index, measuring the broader market, advanced 13.40 points (1.34 percent) to 1,010.48.

The blue-chip Dow nailed its fourth consecutive week of gains and has now climbed nearly 45 percent from its low in early March.

Stocks wobbled in early trading but quickly found their footing in upward momentum.

The Labor Department's report, published before the market open, "brought positive surprises all around," said Patrick O'Hare of

"These are headlines that should warm the (Obama) administration in Washington and they will engender confidence in the idea that the worst of the downturn is over."

The data showed the unemployment rate fell unexpectedly to 9.4 percent in July as job losses in the month narrowed to 247,000.

That was better than expected by private economists, who had forecast a loss of 325,000 jobs and a jobless rate rising to 9.6 percent from the June level of 9.5 percent.

Analysts cautioned that while the headline figures were relatively improved, the labor market remained extremely weak.

Ian Shepherdson of High Frequency Economics said the unexpected improvement in the unemployment rate was unlikely to last, given July's number "was due entirely to a 422,000 drop in the labor force."

The bulls dominated the market despite such nagging worries.

"Even with traders debating whether the recent rally in the equity markets in the past month and since early March has outpaced the economic reality, stocks managed to keep chugging higher," Charles Schwab & Co. analysts said in a client note.

Industrials benefited from the upbeat outlook.

Boeing climbed 2.57 percent to 46.69 dollars, DuPont rose 1.14 percent to 32.83 dollars and Caterpillar added 1.36 percent at 47.78 dollars.

The Charles Schwab analysts said the rally was led by "the consumer discretionary and financials sectors, which are both directly impacted by the outlook for employment on the health of the consumer."

Media and theme park operator Walt Disney Co. was the Dow's biggest gainer, up 5.20 percent at 26.69 dollars.

The S&P banking index rose 3.68 percent.

Government-rescued insurer AIG also boosted sentiment, reporting profits for the first time in nearly two years. Its shares, which had added more than 70 percent from Monday to Thursday, soared 20.46 percent to 27.14 dollars.

Fannie Mae, the ailing giant mortgage finance lender bailed out by taxpayers, plummeted 16.46 percent to 66 cents. The government-controlled firm reported another huge loss, 14.8 billion dollars in the second quarter, and tapped the US Treasure for an additional 10.7 billion dollars in aid.

Continental Airlines lifted 3.34 percent to 12.39 dollars after announcing a share issue to raise some 170 million dollars.

The bond market weakened. The yield on the 10-year US Treasury bond jumped to 3.854 percent from 3.746 percent Thursday and that on the 30-year bond rose to 4.603 percent from 4.517 percent. Bond yields and prices move in opposite directions.


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