- The Washington Times - Friday, May 5, 2006

From combined dispatches

Stocks surged yesterday, sending the Dow Jones Industrial Average to its third-highest close ever as a smaller-than-forecast increase in the number of jobs last month eased inflation concerns.

The Dow capped its longest weekly winning streak since November by climbing to within 150 points of its record, set in January 2000.

Companies most sensitive to changes in borrowing costs, including Countrywide Financial Corp., led the market’s gains. The employment report suggested the Federal Reserve may put off interest-rate increases after a meeting next week.

Yet the rally was broad, on fairly heavy volume. Industrial, small-capitalization and technology stocks all advanced, the latter at a more modest pace. Shares of Boeing Co., Caterpillar Inc. and United Technologies Corp. extended records, helping boost the Dow average.

“The Fed’s job is done,” said Nick Calamos, who helps manage $47.6 billion as co-chief investment officer at Calamos Asset Management Inc. in Naperville, Ill. “This is very good news for stocks.”

The Dow average gained 138.88, or 1.2 percent, to 11,577.74, the third-highest close ever. The gauge reached a record 11,722.98 — just 145 points away — on Jan. 14, 2000. Procter & Gamble Co. was the only one of the measure’s 30 companies to retreat.

The Standard & Poor’s 500 Index added 13.51, or 1 percent, to 1325.76, a level not seen since February 2001. The tech-heavy Nasdaq Composite Index climbed 18.67, or 0.8 percent, to 2342.57.

The Russell 2000 index of smaller companies gained 0.9 percent to 781.83, another all-time high.

The Dow notched its fifth-straight weekly advance, with better-than-expected earnings helping spur the rally. This week, the Dow increased 1.9 percent, while the S&P; 500 added 1.2 percent and the Nasdaq gained 0.9 percent.

The S&P; 500 remains 13 percent, and the Nasdaq 54 percent, below their peaks.

Year to date, the Dow is up 8 percent, both the S&P; 500 and the Nasdaq are up 6 percent, and the small-cap Russell 2000 has soared 16 percent.

The Labor Department report showed employers added 138,000 jobs last month, while the unemployment rate held steady at 4.7 percent. Economists expected 200,000 jobs and 4.7 percent. In March, 200,000 jobs were added, fewer than the 211,000 originally reported.

The 10-year Treasury note’s yield fell 5 basis points to 5.10 percent after the jobs report.

Investors shrugged off data in the jobs report showing that average wages last month increased 3.8 percent from April 2005, the biggest gain since August 2001. A government report Thursday had indicated that labor costs last quarter jumped twice as much as economists expected.

Boeing climbed $1.83 to a high of $88.47. Shares of the world’s No. 2 commercial-jet maker may reach $97 within 12 months, up from a prior estimate of $85, Merrill Lynch & Co. analyst Ronald Epstein wrote. Boeing stock may get a boost before the Paris and Farnborough air shows, where new orders may be announced, he wrote.

Caterpillar, the best performer in the Dow average this year, climbed $1.17 to a record $79.98. The world’s largest maker of earthmoving equipment last month posted a 45 percent gain in quarterly profit and boosted its forecast on higher prices and sales of gas-drilling machinery. The stock has rallied 38 percent in 2006.

United Technologies, the maker of Pratt & Whitney jet engines, gained $1.14 to an all-time high of $64.91. The company last month raised its 2006 profit forecast after it announced first-quarter earnings that exceeded analysts’ estimates.

A gauge of financial shares added 1.4 percent and was the biggest contributor to the S&P; 500’s gain among 10 industry groups. A measure of utilities climbed 2.1 percent for the best performance.

Countrywide, the biggest U.S. mortgage lender, rallied $1.48 to $41.38. Fannie Mae, the largest source of money for U.S. mortgages, added 99 cents to $51.41.

TXU Corp., the No. 1 electricity producer in Texas, gained $1.85 to $58.14, extending its advance this week to 17 percent.

About 10 stocks rose for every three that fell on the New York Stock Exchange. About 1.69 billion shares changed hands on the Big Board, 4.1 percent more than the three-month average.

On the corporate scene, the Wall Street Journal reported that celebrated investor Warren Buffett’s company Berkshire Hathaway may announce a major acquisition at its annual meeting this weekend.

The Journal, citing unidentified analysts, said Pacific Gas and Electric and Los Angeles automotive insurer Mercury General may be potential targets for Berkshire Hathaway.

El Paso Corp., the owner of the longest U.S. natural-gas pipeline system, rallied $1.69, or 13 percent, to $15.18 for the top gain in the S&P; 500. First-quarter net income tripled to $356 million on rising oil and gas prices and higher transportation fees.

P&G; slipped 13 cents to $55.73. The largest U.S. household-goods maker this week reported sales that trailed analysts’ estimates.

Shares of Aon Corp. retreated $3.95, or 9.5 percent, to $37.84 for the worst performance in the S&P; 500. The world’s second-largest insurance broker reported earnings that trailed analysts’ estimates amid higher brokerage costs.

EBay Inc. fell $1.72, or 5 percent, to $32.39 for the S&P; 500’s second-steepest loss. Chief Executive Officer Meg Whitman Thursday left unchanged the No. 1 Internet auctioneer’s 2006 sales forecast that last month missed Wall Street expectations.

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