Fueled by a brightening outlook on interest rates, the post-holiday surge by technology stocks continued Friday, giving the Nasdaq composite index a record 19 percent gain for the week.
Led by technology and financial shares, stock prices roared higher Friday in heavy trading after a market-friendly jobs report showed higher unemployment and a scant increase in average hourly earnings. All major indexes participated in the advance.
Investors took the employment report as the strongest signal yet of an economy slowing enough that the Federal Reserve will soon complete its program of raising interest rates.
The Nasdaq composite jumped 6.4 percent, scoring its third-biggest point gain in history–230.88 points–to close at 3813.38. For the four-day week, the index added a stunning 608.27, and recorded two of its three biggest point gains ever.
“There has been a sea change in expectations,” said Marshall Front, chairman of Front Barnett Associates, a Chicago investment firm.
“A week ago, few believed there was any reason to think that the Fed would soon finish raising rates,” he said. “Now, labor costs, employment, housing and construction are pointing to increasing economic sluggishness.”
The Dow Jones industrial average added 142.56, or 1.3 percent, to end the session at 10,794.76. For the week, the Dow was up 495.52, or 4.8 percent.
Winning stocks overwhelmed losers by better than 5-2 on the New York Stock Exchange, where floor volume totaled a hefty 1.16 billion shares. Analysts found both the market volume and breadth refreshing.
For the broader Standard & Poor’s 500 index, the increase was 28.45 points, or 2.0 percent, to 1477.26.
Smaller stocks were in demand, as the Russell 2000 index leapt by 20.57, or 4.2 percent, to 513.03.
Front thinks the “exuberance” may be a bit overblown, because certain economic indicators will still show strength in the next few months, but the picture will be mixed.
Thus, he said, although the Dow may approach its Jan. 14 record of 11,722.98, it is unlikely to break through to new highs until “after the market perceives a nascent reacceleration of economic growth.”
The Labor Department reported that the unemployment rate climbed back to 4.1 percent in May from a 30-year low of 3.9 percent in April.
In addition to the weak jobs report, the Labor Department said average hourly earnings rose just 0.1 percent in May, a sharp slowdown after a 0.4 percent increase in April.
“I think the odds have now changed and there will not be another rate hike soon,” said Alfred E. Goldman, director of market analysis at A.G. Edwards & Sons Inc. in St. Louis. “I think the Fed will be out of our face for a while.”
Technology stocks led the rally, with investors snapping up shares of market leaders that have been battered in the past few weeks. JDS Uniphase rose $12.12, to $110.37, and Intel jumped $4.50, to $134.19.
Financial stocks, which are vulnerable to rising interest rates, were also higher. Citigroup rose $3.31, to $66.62; J.P. Morgan gained $6.87, to $138.81; and Chase Manhattan rose $3.56, to $80.69. Chicago-based Bank One rose $2.12, to $36.44.
Locally, Vernon Hills-based CDW Computer Centers rose $7.25, to $125.87. Chicago-based True North Communications rose $1.06, to $44.87, after Credit Suisse First Boston initiated coverage with a “buy” rating. Libertyville-based Allscripts rose $1.69, to $29.25, after AG Edwards initiated coverage with an “accumulate” rating.
