Stocks start September higher on job growth

Caroline Valetkevitch

Reuters

Stocks began September with strong gains on Friday as a report showing slightly more-than-expected U.S. job growth lifted hopes that companies will sustain profitability even as the expansion moderates.

The Dow Jones industrial average and the Standard & Poor's 500 Index closed at their best levels since May, while the Nasdaq ended at its best since June. But analysts said volume was well below average as traders left early for the long weekend for the U.S. Labor Day holiday.

Drug maker Bristol-Myers Squibb Co.'s stock (NYSE:BMY - news) gained after a U.S. judge blocked further sales of generic versions of Bristol-Myers' blood-thinning medicine, Plavix, in a decision issued late on Thursday. Pfizer Inc. shares (NYSE:PFE - news) also rose after a favorable court decision.

Before the opening, the Labor Department reported 128,000 jobs were added to nonfarm U.S. payrolls in August -- slightly above forecasts. Analysts said the jobs report suggested there was strength in the economy, raising optimism about earnings. It also showed a slowdown in wage inflation, which reinforced views that U.S. interest rates will be left steady again when the

Federal Reserve's policy-setters meet on September 20.

"It was pretty much a perfect number. It was not so strong the Fed will re-engage nor so weak you are concerned the economy is starting to stumble," said Stephen Massocca, co-chief executive of Pacific Growth Equities, in San Francisco.

The Dow Jones industrial average (^DJI - news) climbed 83.00 points, or 0.73 percent, to end at 11,464.15. The Standard & Poor's 500 Index (^SPX - news) advanced 7.19 points, or 0.55 percent, to finish at 1,311.01. The Nasdaq Composite Index (^IXIC - news) gained 9.41 points, or 0.43 percent, to close at 2,193.16.

For the week, the Dow rose 1.6 percent, the S&P 500 added 1.2 percent and the Nasdaq jumped 2.5 percent.

Investors snapped up industrial stocks on the perception that the Fed will keep interest rates on hold. In August, the Fed to decided to pause after raising rates 17 times in two years since June 2004.

Shares of companies whose performance especially benefits from economic growth rose, including heavy-equipment maker Caterpillar Inc. (NYSE:CAT - news) and chemicals company DuPont Co. (NYSE:DD - news) Caterpillar rose 1.4 percent, or 92 cents, to $67.27 on the New York Stock Exchange and was among the stocks lifting the Dow. DuPont's stock gained 1.3 percent, or 51 cents, to $40.48.

General Motors Corp.'s shares (NYSE:GM - news) rose 3.7 percent, or $1.09, to $30.27 and contributed heavily to the Dow's gain after it said U.S. sales rose 4 percent in August.

Bristol-Myers gained 5.5 percent, or $1.20, to $22.95, while rival drug maker Pfizer added 1.5 percent, or 40 cents, to $27.96. They were among the top positive influences on the S&P 500.

Pfizer's stock shot higher after a federal court in North Carolina upheld the company's U.S. patent covering the active ingredient in Norvasc, the world's most prescribed prescription medicine to treat hypertension.

Shares of the world's biggest chip maker Intel Corp. (Nasdaq:INTC - news) jumped 1.6 percent, or 31 cents, to $19.88 on the Nasdaq after a brokerage raised its rating on the stock. Intel helped drive both the Nasdaq and the S&P 500 higher.

Wal-Mart Stores Inc. (NYSE:WMT - news), the world's biggest retailer, was among the top-weighted gainers in the S&P 500 and helped boost the Dow. Its stock was up 1.6 percent, or 73 cents, at $45.45. Wal-Mart's customers, which include senior citizens on fixed incomes, benefit when oil and gasoline prices fall.

U.S. crude oil for October delivery fell $1.07, or 1.5 percent, to settle at $69.19 per barrel on the New York Mercantile

In other upbeat economic data, consumer sentiment held up better in August than economists had expected, according to a report from the University of Michigan released at mid-morning.

Adding to the market's relief about inflation, the Institute for Supply Management said the prices-paid index -- a measure of inflationary pressures in its report on U.S. factory activity in August -- fell.

However, in other economic news, the National Association of Realtors reported a record drop in pending home sales, more evidence of weakness in the housing sector.

Trading was light on the NYSE, with only about 1.12 billion shares changing hands, well below last year's daily average of 1.61 billion. On Nasdaq, about 1.38 billion shares traded, below last year's daily average of 1.80 billion.

Advancing stocks outnumbered declining ones by a ratio of about 2 to 1 on the NYSE and by 8 to 7 on Nasdaq.

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