Stocks added to gains as the close neared, with the Dow rising above the 11,000 mark, as investors anticipated the weak jobs report would prompt the Federal Reserve to step in and spur economic growth.
The Dow Jones Industrial Average was up more than 70 points, pushing the blue-chip index above the psychologically significant 11,000-level for the first time since May 4 and putting in on track to close above 11,000 for the first time since May 3. The first time the Dow closed above 11,000 was eleven years earlier, on May 3, 1999.
The highest close for the Dow this year was on April 26, when the Dow reached 11,205.
Alcoa and Caterpillar were the blue-chip index leaders, while Bank of America and Kraft fell.
The S&P 500 and the Nasdaq were also higher. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell near 20.
Materials, consumer discretionary and energy sectors rose, while telecoms fell.
The dollar fell sharply against the euro and yen, while gold prices continued to rally above $1,345 an ounce.
Private employers added 64,000 workers last month, short of the 75,000 economists expected, according to government reports. Overall, 95,000 jobs were slashedand the unemployment rate held steady at 9.6 percent in September. Economists polled by Thomson Reuters were expecting it to rise to 9.7 percent.
Some traders believe a weak jobs report increases the possibility the Fed would pump more money into the financial system—known as quantitative easing—to help spur growth.
"The twisted irony is this should be perceived as a negative, but Wall Street is banking on heavy Fed involvement to help push stocks higher for the rest of the year," said Todd Schoenberger, managing director LandColt Trading. "The issue isn’t if the Fed is going to make a move, but how much."
Most market participants believe the Fed will buy $500 billion in assets, he added. That would lead to a 0.5 to 1.5 percent increase in GDP, ensuring GDP will hit the important threshold of 2.5 percent to maintain a level rate of employment.
In a Friday research note, Bank of America Merrill Lynch said the Fed is likely to announce a "flexible program," that would begin with an initial purchase of $500 billion over six months, but more buying could take place after that, if needed.
"The communication will be key," the research note stated. "The language should tie continued buying to the Fed's inflation objectives. We do not expect the Fed to explicitly announce an inflation target, but we do expect it to be clear that the Fed is committed to 1.5% - 2.0% core inflation."
One piece of bad news in the employment data was the rise in private payrolls was due to increases in just two areas: services and health care, said Doug Roberts, chief investment strategist at Channel Capital Research.com.
"If all job growth is coming out of that, it doesn’t speak well to a robust economy," Roberts said.
In earnings news, shares of Alcoa soared after the aluminum producer said its profit rose above expectations. The firm also issued an upbeat outlook, raising its forecast for global aluminum demand this year to 13 percent from 12 percent. In addition, UBS raised its price target on the company to $13.25 from $12.
Earnings season gets into full swing next week with companies including Intel , JPMorgan , Google and General Electric slated to report third-quarter results.
In the tech sector, Deutche Bank downgraded the semicap equipment sector to "sell," saying fundamentals of the business were weakening. The brokerage downgraded Varian Semiconductor to "hold" from "buy" and Lam Research, Novellus, and KLA-Tencor to "sell" from "hold." Deutche Bank also cut price targets for Varian and Applied Materials .
Micron shares jumped more than 6 percent after the chipmaker swung to a profit in the fourth quarter, but its earnings and revenue missed analysts' expectations due to tepid technology spending. However, at least three brokerages lowered their price targets on the firm.
Adobe shares sank after the New York Times reported Microsoft CEO Steven Ballmer was at the software firm's offices for a "secret meeting."
Netflix shares were lower after speculation an initial public offering for Hulu could raise $200 million to $300 million.
Amazon.com will open an applications store that runs on Google's mobile Android platform, the Wall Street Journal reported. Amazon's entry into the mobile-applications marketplace would open a new battlefield with Apple, the paper said.
Bank of America raised its price target for Apple to $400 a share from $360, while Oppenheimer raised its price target to $345 from $330, and said it would buy the stock ahead of fourth-quarter earnings.
Google shares rose after Goldman Sachs raised its price target on the search engine giant to $625 from $600.
Shares of Motorola, meanwhile, fell after Citigroup cut the telecom company to "hold" from "buy."
Among financials, Bank of America announced it would halt foreclosures in all 50 states. Also, PNC Financial said it would stop sales of foreclosed homes in 23 states for 30 days, according to the New York Times.
An expected decline in corn stocksdue to weather conditions over the summer was putting pressure on feed stocks, including Smithfield Foods, Pilgrim's Pride and Tyson Foods , which tumbled more than 5 percent each.
Shares of Coca-Cola and PepsiCo were both slightly lower after Coke was reinstated as a "buy" and Pepsi was removed from the "conviction buy" list by Goldman Sachs.
And hedge-fund manager Pershing Square Capital Management bought an 11 percent stakein Fortune Brands , as well as 16.5 percent stake in JCPenney. Both stocks climbed following the news.
Schlumberger shares were slightly higher even after the Department of Justice started an investigation into whether oilfield service provider paid bribes to a consulting firm that had ties with Yemen's government, according to the Wall Street Journal.
In M&A news, Sanofi-Aventis, dismissed suggestionsby bid target Genzyme that it had opened the door to paying a higher price for the US biotech company. S&P equity raised its price target on Genzyme to $77 from $72.
And meanwhile, Sanofi announced it would cut 1,700 jobs or 25 percent of its U.S. pharmaceutical staff by year's end.
In other economic news, wholesale trade rose 0.8 percent in August, more than expected.
Investors will be looking out for remarks by policymakers at a meeting of IMF/G7 officials which starts on Friday and will address rising tension over currency policies.
Hours before the gathering kicked off, Japan’s finance minister warned that the country will continue to intervene in foreign exchange marketswhen deemed necessary. The Japanese authorities, who are worried a strong yen will hit the country’s export sector, intervened in the market for the first time in six years last month.
On Tap For Next Week:
MONDAY: Blackberry suspension goes into effect in UAE; Microsoft Windows phone launch; Nobel prize in economics; NY Fed Pres Dudley Speaks
TUESDAY: NFIB small biz index; employment trends index; employment optimism index; Kansas City Fed Pres Hoenig speaks; CFTC hearing on high frequency trading and flash crash; 3-year note auction; FOMC meeting minutes; P&G shareholder meeting; Earnings from Intel and CSX
WEDNESDAY: Weekly mortgage applications; import & export prices; 10-year note auction; Richmond Fed Pres Lacker speaks; Earnings from JPMorgan
THURSDAY: International trade; PPI; weekly jobless claims; oil inventories; 30-year bond auction; Minnesota Fed Pres Kocherlakota speaks; OPEC meeting; Earnings from Google and AMD
FRIDAY: Atlanta Fed Pres Lockhart speaks; Bernanke speaks; CPI; retail sales; Empire State mfg survey; consumer sentiment; credit card default rates reported; Earnings from GE and Mattel
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