Stocks rallied Friday after the September employment report showed payrolls were cut more than expected, something that is likely to ratchet up pressure on the House to pass the bailout bill when it votes later today.
“They were lousy payroll numbers which made the passage of the bill even more certain and that’s, I think, how the market played that,” Art Cashin, director of floor operations at UBS, told CNBC.
U.S. employers cut nonfarm payrolls by 159,000, the steepest rate in 5 1/2 years, in September. Payrolls have now contracted for a ninth striaght month. Economists had expected to see payrolls shrink by 100,000. The unemployment rate was unchanged at 6.1 percent, as expected.
Meanwhile, the service sector barely grew in September. The ISM reported its nonmanufacturing index, a gauge of service-sector activity, slipped to 50.2 last month from 50.6 in August. Readings above 50 indicate growth, those below suggest contraction. The service sector accounts for about two-thirds of U.S. economic activity.
Wall Street shrugged off this data point as all eyes were on Washington today.
Once the bailout plan moves through Congress, the “focus is gonna turn from this bailout plan to the fundamentals -- and the fundamentals aren’t pretty right now,” Art Hogan, chief market analyst at Jefferies, told CNBC.
The House began debatingthe revised $700 billion bailout plan and is expected to vote later today.
The market had a lot of corporate news to chew on today, with news that Wachovia and Wells Fargo will merge and that AIG will sell some business units as it looks to streamline operations.
Wachovia shares rocketed higher following news that it will be bought by Wells Fargo in an all-stock transaction worth $15.1 billion. Shares of Wells Fargo also rose.
Both stocks held onto most of their gains, even after Citigroup said it may file a lawsuit to stop the deal. The deal essentially pulled the rug out from underneath Citigroup, which had been in an FDIC-orchestrated deal to buy Wachovia.
Citigroup was the biggest drag on the Dow, falling about 8 percent.
AIG shares jumped 10 percent after the insurance giant said it will sell off a number of business units in an effort to become a smaller, more nimble company in the wake of an $85 billion bailout from the federal government.
Apple shares recovered after a spokesman declared untrue a rumor that CEO Steve Jobs had suffered a heart attack. The stock had plunged to a new low of $94.65 at the opening bell as the rumor made the rounds.
Other blue-chip techs recovered from Thursday's bludgeoning.
Research In Motion , Google , Microsoft and Intel were all higher.
In other signs that the credit crisis is spreading, California is fast running out of cash and may need as much as $7 billion in aid from the Treasury Department within weeks, the Los Angeles Time reported, quoting a letter from California Governor Arnold Schwarzenegger to Treasury Secretary Henry Paulson.