Stock Market Shrugs Off Jobs Report

updated 7:00 p.m. ET Nov. 9, 2009

U.S. stock indexes closed higher Friday as investors snapped up industrial and other selected issues after an earlier market decline that was fueled by news the U.S. economy lost 190,000 jobs and the jobless rate hit a 26-year high of 10.2% in October. The late rally drove the Dow industrials above 10,000 for a second day.

On Friday, the 30-stock Dow Jones industrial average finished higher by 17.46 points, or 0.17%, at 10,023.42. The broad Standard & Poor's 500-stock index was up 2.67 points, or 0.25%, at 1,069.30. The tech-heavy Nasdaq composite index gained 7.12 points, or 0.34%, to 2,112.44.

On the New York Stock Exchange, 15 stocks were higher in price for every 14 that declined. Breadth on the Nasdaq was 14-12 negative. Trading was moderate.

Market watchers cited by S&P MarketScope said some traders discounted the jobs data, while other unwound positions ahead of the weekend.

Among stocks on the move in Friday's session, Amazon.com (AMZN) advanced on an analyst upgrade.

Starbucks (SBUX) shares gained following its better than expected earnings report and guidance.

General Electric (GE) shares jumped after an Oppenheimer analyst upgraded the conglomerate to outperform from perform.

Shares of home-improvement retailers Home Depot (HD) and Lowe's Companies (LOW) climbed after Bank of America Merill Lynch upgraded both companies to buy from underperform.

Treasuries were flat. The dollar rose. Gold rose. Oil fell.

Treasuries were flat after an earlier bounce on the jobs report. The dollar index rose.

December gold futures were up $6.00 to $1,095.30 per ounce in afternoon trading, but down from a record $1,101.90 achieved earlier in the session.

December West Texas Intermediate crude oil futures, which climbed well over $80 earlier in the week, were off $2.57 to $77.05 per barrel in afternoon trading.

The Labor Dept. reported Friday that U.S. payroll employment fell 190,000 in October, just a bit worse than the 175,000 expected, but the unemployment rate jumped to 10.2% from 9.8%, much higher than the small rise to 9.9% expected by the market. The 190,000 drop in payrolls was concentrated in the goods-producing sector, with construction down 62,000 and manufacturing down 61,000. Government employment was unchanged, but retail lost another 40,000 jobs. Hourly earnings rose five cents [0.3%], while weekly hours were unchanged. The September payroll drop was revised to 219,000 from the 263,000 reported last month.

"Although the market usually focuses on the payroll report, the sharp jump in the unemployment rate will draw most eyeballs today, and probably reverse much of yesterday's strong [equity] gains," said Standard & Poor's chief economist David Wyss in a note Friday.

But market players may have focused on a potential mitigating factor in the report: upward revisions of job losses in September and August.

PIMCO CEO Mohamed El-Erian highlighted the 10.2% U.S. jobless rate as a confirmation that the economic problem is becoming "deeper and more protracted," according to Reuters headlines. He said the unemployment report put the jobless issue "front and center" on the U.S. political agenda. PIMCO has been consistent in discouraging the Fed from prematurely exiting quantitative easing and accommodative policy, notes Action Economics. El-Erian warned "It's not just the increase in the headline number to 10.2%. It's also about the longer-term nature of unemployment, the increase in underemployment, and the prospect for only a very gradual recovery."

In company news Friday, Fannie Mae (FNM), the largest provider of funding for U.S. home loans, said bad mortgages and a federal foreclosure prevention program left it with a $18.9 billion loss, forcing it to tap the Treasury again to plug a hole in its net worth. Fannie Mae , seized by the government last year, said the quarterly loss stemmed from $22 billion in credit-related expenses. These included charges on mortgages it bought out of securities as it modified loans under President Barack Obama's foreclosure prevention plan. The company also boosted its provision for credit losses in future quarters, and said it expects those impairments to increase this quarter and through 2010.

American International Group (AIG), the insurer bailed out by the U.S. government, posted its second straight profit in the third quarter, helped by recovery in the value of its investments. Net profit was $455 million, or 68 cents a share, compared with a loss of $24.47 billion, or $181.02 a share, in the year-earlier quarter. The results included $1.95 billion in special gains, including from improvement in the value of securities held by AIG Financial Products, the unit largely responsible for AIG's massive losses in 2008, which led to the U.S. bailout. Adjusted profit, excluding realized gains and losses, was $1.9 billion, or $2.85 a share.

In other economic news Friday, U.S. wholesale sales rose 0.7% in September, and inventories fell 0.9%. The 1.0% rise in August sales was revised up to 1.1%. Petroleum sales increased 1.0% after a 7.0% August increase. Excluding petroleum, sales were up 0.6% in September vs. a revised 0.4% gain in August [was 0.3%]. Durable sales were up 0.7% after a revised 1.5% gain in August [was 1.2%]. Nondurable sales rose 0.6% from 0.7% previously [revised from 0.9%]. For inventories, the September data were mixed. Excluding petroleum, inventories declined 0.9%. The inventory-sales ratio fell to 1.18 1.20 previously. The ratio was as high as 1.34 in January.

The Group of 20 leading nations will agree this weekend it is too early to pull the plug on emergency support for the global economy and launch a new system of checks to help rebalance world growth and prevent future crises. British finance minister Alistair Darling is hosting the third meeting of G20 finance ministers and central bankers this year in St Andrews, Scotland, aiming to put flesh on the bones of agreements made at a leaders' summit in Pittsburgh in September. Since then there have been growing signs that the world is finally coming out of the deepest downturn in decades and that things may be getting back to normal after a crisis that wiped out some of the biggest financial institutions.

The European Central Bank on Thursday took a first small step towards easing out its crisis steps -- ultra-low interest rates and cash injections for the economy -- by signaling one-year loans to banks will not be repeated next year. But Darling said it would be premature to declare victory over what has been the worst financial crisis since the 1930s and the extraordinary stimulus countries all around the world had thrown into their economies had to stay in place for now.

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