Dow tops 11,000 for 1st time since May
Friday, October 8, 2010
Investors ignore a weak jobs report. Instead, they focus on a lower dollar and potentially lower interest rates, pushing stocks higher. Food processors drop as grain stocks shrink.
NEW YORK (AP) -- Stocks rose Friday after another weak report on unemployment added to expectations that the Federal Reserve will step in to prop up the economy. The Dow Jones industrial average climbed above 11,000 for the first time since early May.
High unemployment remains a major hurdle as economic growth continues to be sluggish. The Labor Department's report, considered the most important piece of news on the economic calendar, did little to alter the view that the economy remains weak.
While job creation remains scarce, however, there could be a silver lining. Expectations are growing that the Federal Reserve will try to stimulate the economy by stepping up its purchases of government bonds. The gloomy jobs report could give the Fed more incentive to act.
Jason Pride, director of investment strategy at wealth management firm Glenmede, said "by not being stronger, (the jobs report) gives them the window of opportunity to take action."
Anticipation of the Fed making a move has driven bond yields and the dollar sharply lower in recent days. Bond yields fell again Friday after the jobs report was released. The yield on the two-year note hit a new record low, but the dollar crept slightly higher.
The Fed's goal, if it starts buying bonds again, would be to drive interest rates down further from their already low levels and spark borrowing and spending. Lower rates could also eventually drive investors into riskier assets like stocks or into currencies in countries with more attractive interest rates.
Scott Brown, a senior vice president and chief economist at Raymond James & Associates, predicted the Fed would announce a specific plan when it wraps up its next meeting Nov. 3. But Brown warned not to expect an immediate improvement in the economy after the Fed starts buying bonds again.
"It's a long process. It doesn't happen overnight," Brown said. "The key factor in a recovery is time."
The Dow rose 67.51, or 0.6 percent, 11,016.09 in late afternoon trading. It hadn't traded above the psychological 11,000 barrier since May 4 just days before the "flash crash" spooked investors and added to a broad sell-off during the spring.
The Standard & Poor's 500 index rose 7.79, or 0.7 percent, to 1,165.85, while the Nasdaq composite index rose 20.18, or 0.9 percent, to 2,403.85.
About three stocks rose for every two that fell on the New York Stock Exchange where volume came to 640 million shares.
The yield on the 10-year Treasury note, which helps set rates on loans including mortgages, fell to 2.37 percent from 2.38 percent late Thursday.
