Wall Street closed a stellar week on Friday after recent economic data, including a stronger-than-expected labor market report, bolstered optimism that the economy would not fall back into recession.
The S&P 500 gained 3.8 per cent for the week, its best in eight, setting the stage for a more bullish mood when markets re-open Tuesday after the long Labor Day weekend. US Treasury debt yields have risen from levels reflecting expectations of another recession.
What you need to know
- The SPI rose 50 points to 4587
- The Australian dollar was buying 91.59 US cents
- In Europe, the FTSE rose to a four-month high
- Gold fell $US2.30 an ounce to $US1251.10
- Oil fell 42 US cents a barrel to $US74.60
- Australian diary: calendar of the week's events
- Wall Street Week Ahead: What's in store
Stock sectors sensitive to economic swings like technology and banks led the week's gains. On Friday, the S&P financial sector index rose 2.2 per cent, with Goldman Sachs up 5.4 per cent at $US147.29 and Janus Capital up 6.6 per cent at $US10.12.
"Equity markets had priced in the non-trivial probability of a double dip, and what you're seeing is that fear pricing is coming out," said Mike Dueker, head of economics at Russell Investments in Tacoma, Washington.
US payrolls fell for a third straight month in August, the Labor Department said, but the loss of 54,000 non-farm jobs was far less than the 100,000 expected by economists polled by Reuters, and private hiring surprised on the upside.
"Recovery will be slow, but at least reliable, and that should add some tailwinds (for stocks) the rest of the year," Dueker said.
The Dow Jones industrial average shot up 127.83 points, or 1.24 per cent, to 10,447.93, marking a move back into the black for the year. The Standard & Poor's 500 Index gained 14.41 points, or 1.32 per cent, to 1104.51. The Nasdaq Composite Index rose 33.74 points, or 1.53 per cent, to 2233.75.
The S&P 500 closed above 1100 for the first time since August 10. Momentum measures, including the moving average convergence-divergence, indicate the benchmark is poised for more gains.
But the upward move faces strong resistance, with the 200-day moving average near 1116. Chartists point to 1130 as key resistance, tested in June and early August, with both failures opening the door to steep declines.
Stocks sold off sharply through August on concerns the US economy could be headed for a double-dip recession. But a report that showed the manufacturing sector grew more than expected last month sparked a rally on Wednesday that lifted stocks to their best day in eight weeks.
In addition to the S&P 500's sharp weekly percentage gain, the Dow rose 2.9 per cent for the week and the Nasdaq advanced 3.7 per cent.
Technology stocks outperformed the market this week. The PHLX semiconductor index has gained 6.9 per cent in the past three days, its best such run since mid-June.
Video game maker Take-Two Interactive Inc jumped 7.3 per cent to $US9.50 a day after its quarterly profit smashed Wall Street's expectations of a loss, and it raised its forecast.
On the downside, Campbell Soup Co dropped 3 per cent to $US36.21 after posting lower-than-expected quarterly sales and forecasting growth below its long-term target as it grapples with a weak economy.
About 6.6 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, far below last year's estimated daily average of 9.65 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 18 to 5, while on the Nasdaq, about 17 stocks rose for every five that fell.
Reuters
