New York – Wall Street advanced uneasily today after the government reported signs of strength in employment but also a jump in wholesale inventories that indicated falling demand.
Bonds fell sharply after the jobs report reduced expectations for an interest rate cut.
The mixed view of the economy sent stocks higher in early trading, but later forced them to give up a big chunk of that climb. The market, always on alert about the economy, has been even more hypervigilant and quick to react since last week’s global stock plunge.
Stocks also wobbled after Susan Bies, an outgoing member of the Federal Reserve’s rate-setting committee, said the economy is strong and job creation is “incredible,” but that the troubles with the subprime lending market could escalate. Concerns about mortgage problems contributed to last week’s drop.
The unemployment rate fell to 4.5 percent from 4.6 percent as U.S. employers added 97,000 nonfarm workers in February, the Labor Department said. The employment gain followed a rise in January that was larger than previously estimated. However, the Commerce Department’s report of a 0.7 percent increase in wholesale inventories in January pointed to a drop in demand and possible economic weakness.
Still, strength in the job market did help calm investors still rattled after last week’s sell-off triggered the biggest weekly loss for U.S. stocks in four years. The much-anticipated report coming in better than expected alleviated fears about the economy slowing too abruptly.
“That was a critical number that the market looked at,” said Jim Herrick, director of equity trading at Barid & Co. “We anticipated it all week, and it assuaged some fears in the market about the economy. I think we’re still going to be data-driven for quite a while.” In early afternoon trading, the Dow Jones industrial average rose 10.74, or 0.09 percent, to 12,271.44.
Broader stock indicators were slightly higher. The Standard & Poor’s 500 index was up 1.30, or 0.09 percent, at 1,403.19, while the technology-dominated Nasdaq composite index rose 0.27, or 0.01 percent, to 2,388.00.
Stocks rose on the jobs report, but Treasury bond prices fell sharply as the jobs report made it more unlikely the Federal Reserve would lower rates. Though the report was slightly weaker than expected, bond investors had been positioned for an even softer number.
The yield on the benchmark 10-year Treasury note shot up to 4.60 percent from 4.51 percent late Thursday.
With little energy-related news to trade on, oil prices slipped as investors made short-term moves. Light, sweet crude fell 84 cents to $60.80 a barrel in midday trading on the New York Mercantile Exchange.
Gold prices slipped, while the dollar rose against the euro and the yen.
Lending support to the markets was a Commerce Department report that the trade deficit narrowed slightly in January as U.S. exports rose to an all-time high while imports dropped. This sent a good signal that the nation’s trade imbalances may finally start to improve this year.
The new data, especially on the jobs front, had to potential to erase the gains that stocks have made this week. But they mostly met expectations, leaving investors somewhat calmed and eager to see if next week’s reports also suggest slow but steady growth.
“It was a good comeback. Let’s see what other economic data comes out, as the days and weeks go by,” said Stephen Carl, principal and head of equity trading at The Williams Capital Group.
