Report on job growth encourages investors

NEW YORK -- Investors found some reassurance in weak job growth figures Friday, and sent stocks sharply higher on a bet that the numbers will prompt Federal Reserve to be less aggressive in raising interest rates. The Dow Jones industrials climbed more than 120 points as Wall Street had its best week to date for 2005.

The markets opted for a glass-half-full approach to the Labor Department's job creation report, which showed just 146,000 new jobs last month, far less than the 200,000 expected. December's job gains were revised downward to 133,000 from the 157,000 reported a month ago.

While such a disappointing report has driven stocks lower in the past, the numbers assuaged investors' fears that inflation would become an issue. With the economy growing at a tepid rate, inflation is unlikely to be a factor, and the Fed's modest stance on raising interest rates would remain unchanged.

"I certainly think this report provides no reason for the Fed to turn more aggressive in its tightening. 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," said Richard Rippe, chief economist at Prudential Equity Group in New York.

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.

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 Friday's 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 non-inflationary growth. That's the kind of environment that's good for stocks."

For the week, the Dow rose 2.77 percent, the S&P 500 climbed 2.7 percent.

With the bulk of a largely upbeat earnings season now over, the jobs report was the main catalyst for investors Friday. Still, there were some companies releasing earnings, including media conglomerate Time Warner Inc., which fell 12 cents to $18.04, even though it beat expectations as profits, excluding one-time items, beat Wall Street expectations by 4 cents a share.

Medical supplier Cardinal Health Inc. fell $1.91 to $58.18 after reporting its second-quarter profit sank 42 percent and its controller and other employees had left the company over an accounting probe.

Human resources firm Hewitt Associates Inc. was up $2.19 at $31.28 after reporting its first-quarter earnings rose 16 percent.

Shares of tobacco companies surged after a federal appeals court said the government could not attempt to take up to $280 billion in past profits under a racketeering law. Altria Group Inc., parent of Philip Morris USA, climbed $3.26 to $67 on the news.

Shares of Temple-Inland Inc. jumped $10.67, or 16.4 percent, to $75.75 after the lumber and paper producer said financier Carl Icahn's fund plans to buy between $100 million and $500 million of Temple-Inland stock.

The Russell 2000 index of smaller companies was up 8.12, or 1.29 percent, at 637.44.

Advancing issues outnumbered decliners by nearly 5 to 2 on the New York Stock Exchange, where consolidated volume came to 2.10 billion shares, compared to 1.94 billion on Thursday.

Overseas, Japan's Nikkei stock average fell 0.25 percent. In Europe, Britain's FTSE 100 closed up 0.68 percent, France's CAC-40 rose 0.74 percent for the session, and Germany's DAX index gained 1.35 percent.

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The Dow Jones industrials ended the week up 288.93, or 2.77 percent, finishing at 10,716.13. The S&P 500 index gained 31.67, or 2.7 percent, to close at 1,203.03.

The Nasdaq rose 50.83, or 2.5 percent, during the week, closing Friday at 2,086.66.

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 -- a free-float weighted index that measures 5,000 U.S. based companies -- ended the week at 11,865.91, up 334.66 points from last week. A year ago the index was 11,129.41.

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