- The Washington Times - Friday, February 4, 2005

NEW YORK (AP) — Investors found some reassurance in weak job growth figures yesterday, and sent stocks sharply higher on a bet that the numbers will prompt the Federal Reserve to be less aggressive in raising interest rates. The Dow Jones Industrial Average climbed more than 120 points as Wall Street had its best week of 2005.

The markets opted for a glass-half-full approach to the Labor Department’s job creation report, which showed just 146,000 new jobs last month — far less than the 200,000 expected. December’s job gains were revised downward to 133,000 from the 157,000 reported a month ago.

While such a disappointing report has driven stocks lower in the past, the numbers assuaged investors’ fears that inflation would become an issue. With the economy growing at a tepid rate, inflation is unlikely to be a factor, and the Fed Reserve’s modest stance on raising interest rates would remain unchanged.

“I certainly think this [jobs] report provides no reason for the Fed to turn more aggressive in its tightening. That’s because while it’s creating jobs, the economy is not booming and there’s not a lot of labor-cost pressure in the system,” said Richard Rippe, chief economist at Prudential Equity Group in New York.

The Dow rose 123.03, or 1.16 percent, to 10,716.13. It was the first triple-digit gain for the Dow in 2005 and the best one-day gain since Dec. 1.

Broader stock indicators also moved substantially higher. The Standard & Poor’s 500 Index was up 13.14, or 1.1 percent, at 1,203.03, breaking through the 1,200 level for the first time since Jan. 3. The Nasdaq Composite Index gained 29.02, or 1.41 percent, to 2,086.66, the index’s best close since Jan. 18.

The week’s good news — successful elections in Iraq, no surprises from the Fed on interest rates and falling oil prices — prompted much of the gains and helped investors put yesterday’s jobs report in perspective, analysts said. Economic growth, without inflationary pressures, could be healthier for the economy in the long-term, not to mention better for stock prices.

“It really is the sweet spot,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “This economic environment is just very modest and very sustainable, with noninflationary growth. That’s the kind of environment that’s good for stocks.”

For the week, the Dow rose 2.77 percent, the S&P; 500 climbed 2.7 percent and the Nasdaq gained 2.5 percent. The Dow and S&P; 500 are only down less than 1 percent for 2005. The Nasdaq, however, remains down 4.1 percent, as small-cap stocks and technology shares have taken the brunt of investors’ unease.

With the bulk of a largely upbeat earnings season now over, the jobs report was the main catalyst for investors yesterday. Still, there were some companies releasing earnings, including media conglomerate Time Warner Inc., which fell 12 cents to $18.04, even though it beat expectations as profits, excluding one-time items, beat Wall Street expectations by 4 cents a share.

Medical supplier Cardinal Health Inc. fell $1.91 to $58.18 after reporting its second-quarter profit sank 42 percent and its controller and other employees had left the company over an accounting probe.

Human resources firm Hewitt Associates Inc. was up $2.19 at $31.28 after reporting its first-quarter earnings rose 16 percent.

Shares of tobacco companies surged after a federal appeals court said the government could not attempt to take up to $280 billion in past profits under a racketeering law. Altria Group Inc., parent of Philip Morris USA, climbed $3.26 to $67 on the news.

Shares of Temple-Inland Inc. jumped $10.67, or 16.4 percent, to $75.75 after the lumber and paper producer said financier Carl Icahn’s fund plans to buy between $100 million and $500 million of Temple-Inland stock.

The Russell 2000 index of smaller companies was up 8.12, or 1.29 percent, at 637.44.

Advancing issues outnumbered decliners by nearly 5 to 2 on the New York Stock Exchange, where volume came to 1.64 billion shares, compared with 1.56 billion on Thursday.

Overseas, Japan’s Nikkei stock average fell 0.25 percent. In Europe, Britain’s FTSE 100 closed up 0.68 percent, France’s CAC-40 rose 0.74 percent for the session, and Germany’s DAX index gained 1.35 percent.

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