- The Washington Times - Friday, August 7, 2009

NEW YORK (AP) — Major stock indexes jumped more than 1 percent Friday after the government’s July jobs report showed U.S. employers cut fewer jobs last month and the unemployment rate unexpectedly dipped.

The Dow Jones industrial average rose 130 points following the Labor Department’s announcement that companies shed 247,000 jobs in July, the fewest in a year. Economists had expected 320,000 lost jobs.

The report is often the most anticipated piece of economic news each month on Wall Street so the surprise figures provided a strong propellent for stocks. Still, analysts said the latest reading didn’t tell investors anything really new; it did let them know they’ve been justified in sending stocks sharply higher during the past month.

Investors have been betting that the economy is slowly digging out of the recession. Unemployment might take a long time to recover but it would be hard, if not impossible, for the economy to strengthen if it was getting worse.

Instead, the unemployment rate dropped to 9.4 percent from 9.5 percent in June. Economists forecast the rate would rise to 9.6 percent.

“It’s a pretty good jobs number, (and) certainly trending in the right direction,” said James Shelton, chief investment office at Kanaly Trust in Houston. “It’s not necessarily pointing to growth yet,” he added, but it shows deterioration in the economy is lessening.

In midday trading, the Dow rose 131.27, or 1.4 percent, to 9,387.53. Earlier, the blue chips moved above 9,400 for the first time since early November.

The broader Standard & Poor’s 500 index gained 15.71, or 1.6 percent, to 1,012.79, while the Nasdaq composite index rose 30.42, or 1.5 percent, to 2,003.58.

About 2,300 stocks rose on the New York Stock Exchange, while about 600 fell. Volume came to a light 575 million shares, compared with 593 million traded at the same point Thursday.

The jobs report had other encouraging signs. Workers’ hours rose after sinking to a record low in June and paychecks grew after having fallen or flat-lined in some cases.

Marc Harris, co-head of global research for RBC Capital Markets in New York, said the pop in stocks because of the unemployment report wasn’t unexpected but that the market is likely going to have trouble holding its recent gains. The Dow surged more than 13 percent in four weeks on better-than-expected earnings reports.

“We’ve run very fast, very quickly,” he said. “I think we’re due to take a breath.”

Harris is concerned because the quality stocks that kicked off the rally in mid-July, like those of chip makers, are now stalling. Shares of still-troubled companies like financials are pulling stocks higher now to catch up with the rest of the market. That means the rally could now be based on momentum in the market, not conviction about the economy.

In corporate news, insurer American International Group Inc. posted its first quarterly profit since 2007. The insurance giant, which is now majority owned by the government, reported a profit of $1.82 billion in the second quarter as some of its businesses stabilized.

The government has provided AIG with a loan package worth up to $182.5 billion and received an 80 percent stake in the firm after bailing it out at the peak of the credit crisis last fall.

AIG jumped $3.90, or 17.3 percent, to $26.43.

Meanwhile, bond prices fell as the jobs reading limited demand for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.86 percent from 3.76 percent late Thursday.

The Russell 2000 index of smaller companies rose 14.12, or 2.5 percent, to 571.74.

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