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Markets soar on jobs news

The Dow and S&P reach 31/2-year highs after reports that job creation was high while other forces depressed inflation.

Associated Press
Published March 5, 2005

NEW YORK - A surprisingly strong job creation report energized Wall Street Friday, propelling stocks sharply higher as investors grew more confident about the economy and corporate earnings.

The Dow Jones industrial average and Standard & Poor's 500 index reached 31/2-year highs on the news. Wall Street was elated after the Labor Department's report that 262,000 jobs were created in February, far more than the 225,000 economists expected and the most in four months. Jobs were created throughout the economy, from retail to manufacturing.

Investors worried about inflation and higher interest rates found comfort in the report. The nation's unemployment rate ticked up to 5.4 percent, from 5.2 percent in January. And hourly earnings were surprisingly flat, which means workers' paychecks aren't growing and that businesses may have a hard time raising prices.

"It hit the sweet spot," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. "You got more people getting jobs, that's the important thing, and you have growth in wages, but not enough to raise fears of inflation. And that's really helping the market right now."

The Dow rose 107.52, or 0.99 percent, to 10,940.55, its best showing since closing at 10,948.38 on June 12, 2001.

Broader stock indicators also moved sharply higher. The S&P 500 was up 11.65, or 0.96 percent, at 1,222.12, the best closing since the index finished at 1,234.45 on July 3, 2001.

The Nasdaq composite index continued to lag behind the other major indexes, but nonetheless gained 12.21, or 0.59 percent, to 2,070.61, its best close since Feb. 16.

The strong economic data overshadowed another sharp rise in crude oil prices from earlier in the week, along with lingering worries about inflation. Friday's gains pushed all three major indexes to post gains for the week. The Dow rose 0.98 percent, the S&P 500 was up 0.89 percent and the Nasdaq climbed 0.25 percent.

Investors could see Friday's gains as the sharp move higher that many expected after months of uncertainty - and a fresh push toward 11,000 on the Dow could come in the next few days. The Dow last topped the psychologically important 11,000 level in intraday trading on June 13, 2001, and last closed above the mark, at 11,090.74, on June 7, 2001 - right as the dot-com bubble was bursting.

Since then, the 9/11 terror attacks and the wars in Afghanistan and Iraq, a series of corporate scandals and a recession took their toll, and the Dow plunged to a low of 7,286.27 on Oct. 9, 2002. Economic recovery and strong corporate earnings helped the markets recover in 2003 and last year. Friday's economic data points to continuing expansion and stability.

"We've seen confirmation that the economy is expanding, and that's a very strong tail wind for us to move higher," said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers. "We still have some head winds in oil prices and the dollar, but I think we can still run with this."

While Friday's gains were exceptionally strong, analysts warned that the high cost of oil and the falling dollar could make it difficult for the market to maintain these levels without a continued flow of strong economic data. Few government reports on the economy are due next week.

[Last modified March 5, 2005, 00:41:15]

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