Wall Street Shrugs Off January Job Losses of 598K
All the major indexes rose more than 2 percent, including the Dow Jones industrial average, which rose more than 200 points.
Investors are awaiting a Senate vote on its version of an economic stimulus plan that would include a mix of spending and tax cuts. A vote on the Senate plan, which stands at $937 billion, could come late Friday. The House already passed a similar version.
Financial stocks led the market higher as investors also awaited the government's latest revisions to its lifeline for banks. Treasury Secretary Timothy Geithner and other top officials are close to finishing a plan to overhaul the government's $700 billion financial rescue fund. Geithner is expected to announce the changes in a speech on Monday.
Some investors had been worried that the changes would involve nationalizing many banks and, in the process, wiping out shareholders. Many investors are hoping the plan will relax rules requiring businesses to assign a value to all of their assets each quarter. Advocates say altering the rule even temporarily could make it easier for banks to lend without worrying about depleting their cash reserves and running afoul of accounting standards.
Investors focusing on the government's plans were unfazed by a terrible employment reading. The Labor Department said U.S. employers slashed 598,000 jobs in January, the most since late 1974. The unemployment rate rose to 7.6 percent, the highest since late 1992.
But investors have been bracing for the wave of layoffs to hit the economy and are now looking for the response from the Obama administration and lawmakers.
"All focus right now is now is really on Washington," said Dan Cook, senior market analyst at IG Markets in Chicago. He said investors are hoping the unemployment report was bad enough that it goads lawmakers into swift action on the stimulus plan. "It's the hope that the Senate will act and get this approved."
Stocks have been getting a lift at times this week on expectations the plan will pass, analysts say.
Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York, said investors now are wondering "will government stimulus stop this virus that's spreading throughout the country?"
In early afternoon trading, the Dow industrials rose 221.82, or 2.75 percent, to 8,284.89.
Broader stock indicators also jumped. The Standard & Poor's 500 index rose 22.65, or 2.68 percent, to 868.50, and the Nasdaq composite index rose 44.71, or 2.89 percent, to 1,590.95.
The Russell 2000 index of smaller companies rose 14.63, or 3.21 percent, to 469.71.
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to 629.5 million shares.
On Thursday, the major indexes soared more than 1 percent as Wall Street shrugged off troubling economic reports and searched for bargains among battered retail and technology stocks.
Bond prices were mixed Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.96 percent from 2.92 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.29 percent from 0.26 percent.
The dollar was mostly higher against other major currencies. Gold prices fell.
Light, sweet crude fell $1.74 to $39.43 a barrel on the New York Mercantile Exchange.
Cook said investors have been frustrated by the wrangling in Washington over the stimulus plan. Debate in the Senate is now in its fifth day.
"It basically equates to a group of firefighters showing up at a burning house and then arguing over what type of fire hose they're going to use," he said.
Cook said investors are eager for the plan to pass even if it takes time to work its way into the economy, as many economists predict.
"We just want to see a plan and have a direction," he said.
Stocks would tumble if Washington can't pass the plan, Cook said. He contends that even an imperfect effort could help shore up confidence among consumers. Their spending accounts for more than two-thirds of U.S. economic activity. Consumers' reluctance to open their wallets since the fall has acted like a huge weight on the economy.
"If we then fail to come up with anything today or Monday we could really see the bottom fall out," Cook said, referring to the stock market.
Financial stocks rose as investors placed bets on likely government action. Bank of America Corp. jumped $1.36, or 28 percent, to $6.19, while JPMorgan Chase & Co. rose $2.11, or 8.6 percent, to $26.65. Smaller banks also jumped. Fifth Third Bancorp rose 83 cents, or 51 percent, to $2.47. State Street Corp. advanced $3.37, or 12 percent, to $30.91.
In corporate news, Toyota Motor Corp., the world's largest automaker, posted a loss for the fiscal third quarter and said it now expects not only a full-year operating loss, but a full-year net loss - which would be its first since 1950. Toyota rose 50 cents to $69.31.
Overseas, Japan's Nikkei stock average rose 1.60 percent. In afternoon trading, Britain's FTSE 100 rose 1.49 percent, Germany's DAX index rose 2.97 percent, and France's CAC-40 rose 1.84 percent.