Wall Street heads into packing a better-than-expected February jobs report that has fired up visions of stronger economic recovery that could prove a turning point for equities. The Labour Department's monthly report revealed on Friday that Mother Nature's wintry blasts were no match for a US economy gaining steam.
Stocks soared on the news, forging gains over the week after last week's losses. The Dow Jones Industrial Average rose 2.33 percent to close at 10,566.20. It was the first time the bluechip Dow topped the 10,500-point threshold since January 20.
The technology-rich Nasdaq composite leaped 3.94 percent over the week to 2,326.35, its highest level since September 2008. And the broad-market Standard & Poor's 500 index advanced 3.10 percent to 1,138.70 points. The market spent much of the week waiting for the government's monthly labour market report, largely shrugging off negative news as it braced for the key indicator of economic momentum, which this time delivered a powerful lift to sentiment.
The Labour Department said that non-farm payrolls fell by 36,000, surprising most analysts who projected 67,000 job losses because of massive snowstorms that crippled the country's north-eastern region. The unemployment rate remained unchanged from 9.7 percent in January, instead of an expected rise to 9.8 percent. "If this is the kind of jobs report we get with a record blizzard on the East Coast and unusually harsh weather in the Midwest, get ready for a blow-out positive payroll number next month," said Brian Wesbury at FT Advisors.
Investors got a further boost when the Federal Reserve said consumer credit rose 2.4 percent or 5.0 billion dollars in January from December, the first rise since January 2009 and the biggest since July 2008.
"This was seen as a sign that Americans are gaining confidence in the economy. The report also suggested that banks may be more willing to lend money," said Scott Marcouiller at Wells Fargo Advisors. The market will find little new economic fuel next week to keep the momentum going, which could test the strength of investors' convictions in the sustainability of the recovery.
The data calendar is relatively light throughout the week until Thursday, when the government reports the January trade balance and weekly initial unemployment claims.
Retail sales is the highlight on Friday, when investors will be looking to see if there is an increase in consumer spending, which accounts for two-thirds of economic activity and is crucial for recovery. "The January trade balance is expected to widen slightly in response to higher oil prices," IHS Global Insight economists Brian Bethune and Nigel Gaust said in a client note. "February retail sales are expected to be close to flat - lower auto sales are expected to be offset by higher sales in other major channels," they said.
Next week's market action is "difficult to predict" given the dearth of major economic indicators, said Hugh Johnson of Johnson Illington Advisors.
"The mood started to pick up primarily because it looks as though the economy has not been hurt as much by the bad weather as we thought." Bonds slumped over the week. The yield on the 10-year Treasury bond rose to 3.682 percent Friday from 3.595 percent a week earlier and that on the 30-year bond climbed to 4.639 percent from 4.529 percent. Bond yields and prices move in opposite directions.