Stocks pushed higher on Friday on hopes for a new plan to stabilize the banking system and the expectation that an economic stimulus plan will win congressional approval.
The market's performance came despite the biggest drop in payrolls in 34 years and was led by gains in financial, technology, telecom and metals stocks.
The government said the economy shed some 598,000 jobs in January, far more than expected. The national unemployment rate hit 7.6%, up from 7.2% in December and the highest rate in 16 years.
Investors were expecting an awful report, however, and promptly started buying.
At the close, the Dow Jones industrials were up 218 points, or 2.7%, to 8,281. The Nasdaq Composite Index had added 45 points, 2.9%, to 1,592, and the Standard & Poor's 500 Index had gained 23 points, 2.7%, to 869.
The gains for the major indexes were the best since Jan. 28. And they helped the indexes end the week with their first gains after four weeks of losses.
Indeed, the rally was strong enough that the Nasdaq, up 7.8% for the week, is now ahead 0.9% for the year. The Dow, up 3.5% for the week, is still down 5.7% this year. The S&P 500 is still down 3.9% for the year but ended the week with a 5.1% gain.
Crude oil rebounded from a low of $38.60 early in the day to a close of $40.17 a barrel in New York Friday. That was still down $1 on the day.
But much of the rally represents big bets on two big government programs coming to pass:
- Congressional approval of a stimulus package that would help construction and home builders.
- A new plan to stabilize the nation's banking system that gives investors confidence.
If either falters, expect stocks to fall back sharply, much like they did on Sept. 29, when Congress failed to pass a bank rescue package. The Dow promptly fell 778 points, its biggest point loss ever.
A key indicator to watch next week is the S&P 500. The index finished the week just below its 50-day moving average; the index was briefly just above the moving average at about 1:30 p.m. ET on Friday.
If investor confidence builds next week, the index may cross the 50-day threshold, setting the stage for a possible higher move for the market.
How much higher and for how long is a different question. The market will likely test its lows of Nov. 20 some time in the next few months. If it survives that test, a big rally might occur.
For those who don't remember, here are the Nov. 20 closes: 7,552.29 for the Dow; 752.44 for the S&P 500 and 1,316.12 for the Nasdaq.
| Close for week | Wk. ago close | % chg. | 2009 YTD chg. | |
|---|---|---|---|---|
| Dow Jones industrials | 8,280.59 | 8,000.86 | 3.50% | -5.65% |
| S&P 500 | 868.60 | 825.88 | 5.17% | -3.84% |
| Nasdaq Composite | 1,591.71 | 1,476.42 | 7.81% | 0.93% |
| Russell 2000 | 470.70 | 443.53 | 6.13% | -5.76% |
| Crude oil per barrel | $40.17 | $41.68 | -3.62% | -9.93% |
| 10-yr. Treasury yield | 2.98% | 2.84% | 0.14% | 32.75% |
| Gold per troy ounce | $914.30 | $928.40 | -1.52% | 3.39% |
A big, broad rally
For now, the markets believe better times are ahead.Friday's rally was quite broad, with 29 of the 30 Dow stocks showing gains, even Boeing (BA, news, msgs), which is struggling as airlines cut back orders. Only General Motors (GM, news, msgs) was down Friday, off 2 cents, or 0.7%, to $2.84.
More than 440 S&P 500 stocks showed gains, along with 86 stocks in the Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks.
Stock Charts (Year)
Bank of America
Joy Global
- Top Stocks blog: Even after bailouts, automaker bankruptcy still possible
Banks and financial companies were the day's market leaders. Bank of America (BAC, news, msgs) was easily the best performer among the 30 Dow stocks.
The stock surged 26.7% to $6.13 Friday after Ladenburg Thalmann analyst Dick Bove said the bank is "cash-flow positive" and "not in danger of failure." Bove maintained his "buy" rating on the stock.
The close was the first above $6 for Bank of America since Monday, and the stock has experienced a 70% gain since bottoming at $3.77 on Thursday.
Bank of America CEO Ken Lewis also purchased 200,000 shares of the stock for nearly $1 million on Wednesday, in a move to show support in the company. Bank of America shares hit a 25-year low in Thursday trading.
He's done nicely so far. He paid $4.79 a share for his shares, or $958,340. That stake was worth $1.23 million after Friday's close -- a gain of nearly 28%.
Meanwhile, Citigroup (C, news, msgs) was up 10.8% to $3.91. JPMorgan Chase (JPM, news, msgs) added 12.6% to $27.63. Wells Fargo (WFC, news, msgs) rose 17.6% to $19.14.
The Select Sector SPDR-Financial (XLF, news, msgs) exchange-traded fund was up 7.5% to 9.79, its best percentage gain since Jan. 21. The ETF was the best performer of the 10 ETFs that track the sectors of the S&P 500.
The Standard & Poor's Banking Index ($BIX.X) was up 13.8% to 89.82.
Meanwhile, steel and copper stocks pushed higher, in part because of hopes that a huge round of stimulus by China's government will boost demand for copper, steel and other metals.
AK Steel (AKS, news, msgs) jumped 10.2% to $9.85, tops among stocks in the S&P 500 Materials sector. U.S. Steel (X, news, msgs) rose 9.6% to $34.46. Freeport-McMoRan Copper & Gold (FCX, news, msgs) jumped 5.2% to $29.81.
Fertilizer companies Mosaic (MOS, news, msgs) and Potash of Saskatchewan (POT, news, msgs) were up 9% to $45.05 and 6.2% to $91.20, respectively.
The rally also boosted stocks that would presumably win big from a stimulus package, such as Caterpillar and Joy Global, both large makers of construction equipment. Caterpillar (CAT, news, msgs), a Dow component, was up 5.3% to $33.28. Joy Global (JOYG, news, msgs) was up 7.8% to $23.88.
The Philadelphia Housing Sector Index ($HGX.X) was up 6.6% to 83.56 on the assumption that a successful plan to stabilize banks would free up more cash for mortgage lending.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $40.17 | $41.17 | -$1.00 | -3.62% | -9.93% |
| Heating oil (per gallon) | $1.3598 | $1.3672 | -$0.0074 | -5.17% | -3.27% |
| Natural gas (per million BTU) | $4.7740 | $4.5970 | $0.1770 | 8.08% | -15.08% |
| Unleaded gasoline (per gallon) | $1.2507 | $1.2748 | -$0.0241 | -1.43% | 24.05% |
Job losses are 'impressively scary'
January's huge loss was the 13th consecutive month of job losses. And it was so enormous that it was larger than the combined jobs losses from February through August.To make matters worse, it now appears that strength of the jobs slump is stronger than previously thought. December's job losses were revised to 577,000 from a previously reported 524,000. November's losses were revised to 597,000 from a previously reported 584,000.
And, as Philippa Dunne and Doug Henwood of the Liscio Report noted, "The breadth of job losses is impressively scary; there's no shelter in this storm."
The manufacturing, construction, and professional and business services sectors all lost jobs, with manufacturing sustaining 207,000 job losses, its biggest monthly decline in 26 years. Construction employment fell by 111,000 jobs last month; that sector has lost 781,000 jobs since the recession began in December 2007.
Education and health services were the only sectors with job gains last month.
In 2008, the economy lost 3 million jobs, worse than the previously reported loss of 2.6 million, according to the revision.
Average hourly earnings rose 0.3% in January; over the past year, average hourly earnings are up 3.9%.
On Thursday, the Labor Department reported that first-time claims for unemployment benefits rose 35,000 to a seasonally adjusted 626,000 -- a 26-year high -- in the week ending Jan. 31.
"We're losing jobs at an alarming pace and bracing for more weakness," Scott Anderson, senior economist at Wells Fargo, told Bloomberg News. "The private sector is flat on its back at this point. The government needs to step in with a stimulus, the sooner the better."
| Month | Job losses | Month | Job losses |
|---|---|---|---|
January 2009 (p) | 598,000 | July 2008 | 67,000 |
December 2008 (p) | 577,000 | June 2008 | 100,000 |
November 2008 | 597,000 | May 2008 | 47,000 |
October 2008 | 423,000 | April 2008 | 67,000 |
September 2008 | 403,000 | March 2008 | 88,000 |
August 2008 | 127,000 | February 2008 | 83,000 |
Job losses last 12 months | 3,304,000 | p -- preliminary |
GE leaves dividend at 31 cents
General Electric (GE, news, msgs) said Friday it will pay a planned 31-cent dividend to shareholders. But the company will evaluate dividend payments for the second half of the year as uncertainty grows over the long-term health of the economy and GE's ability to maintain its top credit rating.The move came as analysts continue to predict that the conglomerate will be forced to eventually cut its payments as it tries to stabilize its ailing lending unit and faces a deep recession that is hitting its industrial businesses hard.
Stock Charts (Year)
General Electric
GE's directors approved the dividend that will be paid to shareholders on April 27. Those who own GE stock as of Feb. 23 will receive the quarterly payment. It is the second quarterly dividend GE has paid this year.
The company, which makes everything from locomotive engines to dishwashers, has said it plans to pay a $1.24 per share dividend this year even as it projects lower earnings and says its lending arm, GE Capital, will be much less profitable.
News Corp. posts big loss
News Corp. (NWS, news, msgs) late Thursday followed in the footsteps of other media giants by posting disappointing quarterly results.The company reported a fiscal-second-quarter loss of $6.4 billion, or $2.45 per share, down from profit of $832 million, or 27 cents per share, in the same period a year ago. Excluding charges, the New York company earned 12 cents per share, missing Wall Street's estimate of 19 cents per share.
Revenue fell 8.4% to $7.87 billion.
News Corp. shares rose 3.1% to $7.68 on Friday.
"While we anticipated a weakening, the downturn is more severe and likely longer lasting than previously thought," CEO Rupert Murdoch said in a statement. "We are implementing rigorous cost-cutting across all operations and reducing head count where appropriate."
The Wall Street Journal, which Murdoch acquired when he bought Dow Jones in August 2007, said late Thursday that it will cut approximately 25 positions in its newsroom. The paper has about 760 newsroom employees across the country.
Earlier this week Time Warner (TWX, news, msgs) reported a $16 billion quarterly loss, and Walt Disney (DIS, news, msgs) reported a weaker-than-expected profit for its most recent quarter.
Toyota warns of first loss since 1950
Toyota Motor (TM, news, msgs) warned Friday that it expects to report a loss of $4.95 billion for 2008.The forecast -- nearly three times worse than the company's original expectation for the year -- will be the first annual net loss for the company since 1950. Toyota has also seen its credit rating downgraded from the top level for the first time.
Toyota shares in New York edged up 0.8% to $69.38.
All automakers have been hit by the dramatic drop in demand for new vehicles, but Toyota has more production capacity than most of the others. Toyota's fourth-quarter sales in North America were down 31% from the same quarter last year. The strong yen has also hurt Toyota's export sales.
Biogen Idec's profit rises
Drug maker Biogen Idec (BIIB, news, msgs) reported a fourth-quarter profit of $206.7 million, or 70 cents per share, up from the $201.2 million, or 67 cents per share, it earned in the same quarter a year ago.Earnings from continuing operations were 93 cents per share, the company said, 2 cents ahead of Wall Street's estimates.
The company's best-selling product, the multiple sclerosis drug Avonex, continued to perform well, with sales rising 13% to $566 million. Sales of its other multiple-sclerosis drug, Tysabri, jumped 73% to $156 million in the quarter.
Biogen Idec shares fell 1.5% to $52.48 Friday.
Andrew Rosenbaum contributed to this report.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.270% | 0.270% | 0.000 | 22.73% | 134.78% |
| 5-year Treasury note yield | 1.945% | 1.885% | 0.060 | 3.84% | 25.40% |
| 10-year Treasury note yield | 2.979% | 2.900% | 0.079 | 4.75% | 32.75% |
| 30-year Treasury bond yield | 3.683% | 3.634% | 0.049 | 2.22% | 36.86% |
| Currencies | |||||
| U.S. Dollar Index | 85.645 | 86.360 | -0.715 | -0.94% | 4.25% |
| British pound in dollars | $1.4813 | $1.4628 | 0.0184 | 2.04% | 0.53% |
| Dollar in British pounds | £0.6751 | £0.6836 | -0.0085 | -2.00% | -0.53% |
| Euro in dollars | $1.2948 | $1.2786 | 0.0162 | 1.04% | -7.57% |
| Dollar in euros | € 0.7723 | € 0.7821 | -0.0098 | -1.03% | 8.20% |
| Dollar in yen | 91.91 | 91.10 | 0.81 | 2.27% | 1.39% |
| Canadian dollar in U.S. dollars | $0.818 | $0.812 | $0.0066 | 0.51% | 0.06% |
| U.S. dollar in Canadian dollars | $1.223 | $1.232 | -$0.0091 | -0.50% | -0.05% |
| Commodities | |||||
| Gold | $914.30 | $914.20 | $0.10 | -1.52% | 3.39% |
| Copper | $1.6285 | $1.5000 | $0.13 | 10.90% | 15.50% |
| Silver | $13.1600 | $12.7500 | $0.41 | 4.74% | 12.88% |
| Corn | $3.7725 | $3.7125 | $0.06 | -0.46% | -7.31% |
| Crude oil (NYMEX) (per barrel) | $40.17 | $41.17 | -$1.00 | -9.93% | -9.93% |
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