Hoping for Fed Help, Dow Tops 11000
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The bulls propelled the Dow over the 11000 hump on Friday as Wall Street hoped September’s gloomy jobs report will force the Fed to make its easy-money policies even easier.
Today's Markets
The Dow Jones Industrial Average rose 57.90 points, or 0.53%, to 11006.48, the Standard & Poor's 500 gained 7.09 points, or 0.61%, to 1165.15 and the Nasdaq Composite gained 18.24 points, or 0.77%, to 2401.91. The FOX 50 added 4.10 points, or 0.49%, to 837.00.
While it wasn't based on positive economic news, the latest burst of buying follows Wall Street’s strongest September since 1949 and allowed the blue chips to close above the psychologically-important 11000 level for the first time since May 3.
The drive higher was fueled by hopes the disappointing jobs report will give the Federal Reserve the green light to go ahead with more asset purchases to aid the recovery. The gains were also driven by a surge in commodities and basic materials stocks in the wake of Alcoa's (NYSE:AA) bullish kickoff to earnings season and more weakness for the greenback.
“You have to be very impressed by the overall ability of the market to continue to move higher,” said Ryan Detrick, equities analyst at Schaeffer’s Investment Research. “The market continues to shake off the bad news.”
The blue chips were led by economically-sensitive Caterpillar (NYSE:CAT) and Alcoa, which soared almost 6% after its earnings beat. The index's worst performers were defensive-minded Kraft (NYSE:KFT) and Bank of America (NYSE:BAC), which extended its foreclosure moratorium nationwide.
The Nasdaq Composite outperformed the broader markets, gaining nearly 1% and closing at its highest level since mid-May. Tech stocks like PC maker Dell (NASDAQ:DELL) and Research in Motion (NASDAQ:RIMM) ended sharply higher.
All eyes on Friday were on the September jobs report and the indicator's implications for Fed policy. Wall Street shed most of its losses after the Labor Department said the U.S. lost 95,000 jobs in September, surprising economists who had forecasted payrolls would be unchanged. The government said the unemployment rate remained at 9.6%, compared with forecasts for a rise to 9.7%. Government shed 159,000 jobs, while the private sector created 64,000 jobs, coming in just shy of forecasts for a rise of 75,000.
Rallying on those mostly disappointing figures can be chalked up to the belief they will give the Fed an "all-clear" to initiate QE2, a second-round of quantitative easing aimed at lowering interest rates and boosting growth. At the same time, the bar for the jobs reoprt had been lowered in recent days thanks to a surprise ADP report that showed private-sector jobs unexpectedly contracted last month.
“This probably does not stand in the way of QE2. That’s really the driver,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
The dollar gave up early gains and retreated a bit against the euro as QE2 would involve flooding the system with even more greenbacks, devaluing the currency further. Wall Street and commodities typically have an inverse relationship to the dollar.
After initially extending Thursday's losses, gold closed solidly higher amid the currency fluctuations, gaining $10.30 a troy ounce, or 0.77%, to $1,34.20. Crude slashed its losses, jumping 99 cents a barrel, or 1.21%, to $82.66. Copper soared 2.53 a pound to $3.7665 -- its best day since September 1 and highest settle since July 2008..
Boosted by Alcoa and the rising metals prices, the basic materials sector jumped 2%. Individual stocks like U.S. Steel (NYSE:X) and Hecla Mining (NYSE:HL) enjoyed even stronger gains. Marking a positive start to earnings season, Alcoa beat the Street after Thursday's close by a penny with a non-GAAP profit of 9 cents a share and solidly topped forecasts with a 15% jump in revenue to $5.3 billion.
The markets had a more muted response to the latest figures on wholesale inventories, which showed inventories jumped 0.8% in August, topping forecasts for a rise of 0.5%.
Corporate Movers
Adobe’s (NASDAQ:ADBE) stock declined almost 6%, erasing half of the surge from Thursday that was driven by a New York Times report saying the software maker is in takeover talks with tech heavyweight Microsoft (NASDAQ:MSFT). The pullback in Adobe's stock comes amid some skepticism from the analyst community that the two companies need to merge to take on Apple (NASDAQ:AAPL).
Bank of America (NYSE:BAC) extended its moratorium on foreclosures to all 50 states as the largest U.S. mortgage services responds to political pressure. Lawmakers have called on banks to halt their foreclosure processes in the wake of revelations the industry uses "robo-signers."
Novartis (NYSE:NVS) plans to charge $44,000 a year on a wholesale level for Gilenya, its new multiple sclerosis drug debuting in the U.S. this month, The Wall Street Journal reported. It would make the drug the most expensive M.S. treatment, topping Biogen (NASDAQ:BIIB) and Elan's (NYSE:ELN) Tysabri, which ran about $40,000 a year, the paper said.
Global Markets
The U.K.'s FTSE 100 slid 0.08% to 5657.61, Germany's DAX gained 0.25% to 6291.67 and France's CAC 40 declined 0.19% to 3763.18.
In Asia, Japan's Nikkei 225 fell 0.99% to 9588.88, Hong Kong's Heng Seng rose 0.26% to 22944.18 and China's Shanghai Composite surged 3.13% to 2738.74.