Business

Feeble report on jobs puts economy in a 'sweet spot,' and stocks respond sweetly

A weak jobs report Friday served to assure investors that, due to tepid economic growth, the Federal Reserve will back off on raising interest rates. The Labor Department reported that just 146,000 jobs were created last month - far fewer than the expected 200,000. While such a disappointing report has driven stocks lower in the past, the numbers assuaged investors' fears that inflation would become an issue, and the Federal Reserve's modest stance on raising interest rates is expected to remain unchanged. "I certainly think this (jobs) report provides no reason for the Fed to turn more aggressive in its tightening," said Richard Rippe, chief economist at Prudential Equity Group in New York. "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." On Friday, 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 the 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." The Dow Jones industrials ended the week up 288.93, or 2.77 percent. The S&P 500 index gained 31.67, or 2.7 percent,. The Nasdaq rose 50.83, or 2.5 percent. The Russell 2000 index, which tracks smaller-company stocks, closed the week 24.44, or 3.99 percent, higher at 637.44. The Dow Jones Wilshire 5000 Composite Index ended the week at 11,865.91, up 334.66 points from last week.