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Stocks Close Higher For 4th Session; Banks Gain

Published: Friday, 3 Sep 2010 | 5:04 PM ET

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By: Abby Schultz, JeeYeon Park

Stocks ended the week with a big gain Friday after a better-than-expected jobs report gave investors another reason to think the U.S. economy is beginning to turn around.

Major U.S. Indexes

	Last	Change	Today's % Change	1 Week % Change	YTD % Change
Dow	10447.93	127.83	1.24%	2.93%	0.19%
NASDAQ	2233.75	33.74	1.53%	3.72%	-1.56%
S&P 500	1104.50	14.40	1.32%	3.75%	-0.95%
Russell 2000	643.35	11.09	1.75%	4.31%	2.87%
CBOE VIX	21.29	-1.90	-8.19%	-12.92%	-1.80%

The Dow Jones Industrial Average rose 127.83 points, or 1.2 percent, to close at 10,447.93. The blue-chip index snapped a three-week losing streak with its best performance before a Labor Day holiday since 2006, rising 2.9 percent.

All 30 Dow components rose, led by JPMorgan [JPM Loading... () ], Caterpillar [CAT Loading... () ], and American Express [AXP Loading... () ].

The S&P 500 also snapped a three-week losing streak to end the week 3.8 percent higher. On Friday, the broad index ended 14.41 points higher, or 1.3 percent, to close at 1,104.51.

The Nasdaq, which had been up two of the last three weeks, gained 3.72 percent for the week. On Friday, the index rose 33.74 points, or 1.5 percent, to close at 2,233.75. The index was 3.7 percent higher for the week.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell more than 8 percent, below 22.

All S&P 500 sectors were higher, led by financials, technology and consumer disretionary sectors. For the week, financials were up 5.7 percent.

Stocks had sold off sharply during the summer over concerns the economy may be headed for a double-dip recession. But reports of stronger manufacturing activity in the U.S. and China sparked a rally on Wednesday that helped stocks to their best day in eight weeks. A better-than-expected report on August nonfarm payrolls on Friday gave investors reason to remain optimistic.

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Investors piled into big financial stocks Friday including Goldman Sachs [GS Loading... () ], which jumped more than 5 percent. Financial stocks have taken a bit hit over the summer, with the KBW Bank index tumbling almost 10 percent since the beginning of May. Other banks including JP Morgan [JPM Loading... () ] and Wells Fargo [WFC Loading... () ] also rose.

Strategists such as Anton Schutz, president of Mendon Capital, called the big financials “really cheap” and added in an interview on CBNC that the regionals will see a “big wave” of M&A activity in the near future.

AIG [AIG Loading... () ] was also higher Friday after news the company is a step closer to an initial public offering of its pan-Asian life insurer. AIG is expected to raise $15 billion.

Increased buying is evident in other cyclical names, including housing stocks such as DR Horton [DHI Loading... () ] and Pulte Group [PHM Loading... () ] and retailers, such as Abercrombie & Fitch [ANF Loading... () ] and Gap [GPS Loading... () ], an indication investors have a little more faith in the economic outlook.

Among technology stocks, Google shares [GOOG Loading... () ] rose after a report from Reuters that the search engine giant is planning to enter the music business and compete with rival Apple [AAPL Loading... () ].

Hewlett-Packard shares [HPQ Loading... () ] edged higher a day after it officially beat rival Dell [DELL Loading... () ] in the bidding war to acquire data storage company 3Par [PAR Loading... () ]. Dell could spend the $2 billion it planned to use to buy 3Par to go after smaller technology companies, analysts said.

Analysts speculated companies such as Compellent Technologies [CML Loading... () ], CommVault Systems [CVLT Loading... () ], Isilon Systems [ISLN Loading... () ] in addition to privately-held Pillar Data Systems and DataDirect Networks as potential takeover candidates for Dell.

Take-Two Interactive [TTWO Loading... () ] soared a day after the video game publisher raised its forecast for the quarter thanks to a boost in sales for its "Red Dead Redemption." Rivals Activision Blizzard [ATVI Loading... () ] and Electronic Arts [ERTS Loading... () ] were also higher.

The business of delivering games, meanwhile, has heated up as Apple focuses more on the gaming for its iPod and iPad products, promising to provide heated competition to rivals Nintendo[NTDOY Loading... () ] and Sony [SNE Loading... () ].

Campbell Soup [CPB Loading... () ] led the S&P 500 lower, falling nearly 3 percent after the world's largest soup company posted a lower-than-expected revenue and forecast sales growth for the new fiscal year below its long-term target. The biggest gainer in the S&P was Monster Worldwide [MWW Loading... () ], which rose more than 6 percent.

Mariner Energy shares [ME Loading... () ] recovered a day after the oil and gas platform company burst into flames while operating in shallow Gulf Coast waters. The Coast Guard said oil does not appear to be leaking from the platform.

BP [BP Loading... () ] said the cost of dealing with the Gulf Oil spill rose to $8 billion. The oil giant is also planning to release findings of an internal probe into the causes of the disaster. Meanwhile, oil prices slid near $74 a barrel.

Celldex Therapeutics [CLDX Loading... () ] plummeted more than 25 percent after the biotech firm said it would go ahead alone with the development of its cancer vaccine after partner Pfizer [PFE Loading... () ] pulled out.

Mattel shares [MAT Loading... () ] abruptly plunged more than 20 percent in pre-market trading for unclear reasons before recovering an hour later. Mattel and NYSE Euronext did not immediately return requests for comment. A Nasdaq spokesman said the exchange operator was looking into the matter.

Meanwhile, Chinese officials are exploring ways to block BHP Billiton's [BHP Loading... () ] bid for Potash [POT Loading... () ], according to sources. However, the possibility of Chinese involvement in a valuable Canadian resource has raised concerns in Saskatchewan, which is worried that a takeover of its largest company by a foreign firm could affect jobs and government revenue.

In other markets, the jobs news prompted some investors to leave the safety of gold as well as Treasury securities. Gold fell 0.18 percent Friday to $1,249.20, although it was up more than 1 percent for the week. The 10-year Treasury, meanwhile, fell 13/32 points this week, to yield 2.7 percent.

Commodities rallied with silver prices hitting 52-week highs. Comex Silver for December delivery closed at a two-year high of 19.95 an ounce. Copper prices closed at a new four-month high of $3.5 per pound, gaining more than 3 percent for the week.

In the day's economic news, the government reported August nonfarm payrolls fell by 54,000 jobs in August, far less than the anticipated 100,000 decline. The unemployment rate rose to 9.6 percent. Private payrolls gained 67,000 jobs, better than the 41,000 expected.

"I think traders are paying attention to the fact we are still losing jobs, and there doesn’t seem to be a clear strategy on how to create jobs," said Todd Schoenberger, managing director at LandColt Trading.

Investors may have tempered initial enthusiasm for the jobs data once they realized the figures were not good enough to signal a broad jobs recovery and weren't bad enough to prompt the Federal Reserve to act with more stimulus, Schoenberger said.

Although private sector payrolls rose far more than the 35,000 forecasted by Scott Brown, chief economist at Raymond James & Associates, the boost was "well below that 135,000 or so that we need to keep pace with the growth of the working-age population."

One encouraging sign is temp-help payrolls rose 17,000, meaning employers may be willing to hire fulltime workers in the near future. Temp-help payrolls had stalled in June and July after averaging a monthly gain of 45,000 from October to May, he said.

"It's still suggesting more of the same — positive job growth, but not especially strong," said Brown.

Meanwhile, non-manufacturing in the U.S. grew less than forecast, according to the Institute for Supply Management. The index of national services activity fell to 51.5 in August, the second lowest level for the year. The survey of services activity was expected to show a slight decline, after July's rise to 54.3.

Next week, investors will have their eye on the Federal Reserve's Beige Book, which will be released on Wednesday, for a better idea of what the Fed thinks about the labor market and overall economy.

On Tap Next Week:

MONDAY: Markets closed for Labor Day, Obama speaks on the economy, new Apple iPods ship this week.
TUESDAY: 3-year Treasury note auction.
WEDNESDAY: MBA mortgage applications, 10-year note auction, Fed Beige Book release, Fed's Kocherlakota speaks, consumer credit; Earnings from Smithfield Foods.
THURSDAY: New York Fashion Week begins, McDonald's August sales, weekly jobless claims, oil inventories, 30-year Treasury bond auction.
FRIDAY: Wholesale trade.

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