What a Week: Fabulous Finish

Four days of worrisome running in place ended happily for the markets on Friday as the labor market appears finally to be catching up with strong growth in other parts of the economy. The release of the much-anticipated February payrolls report sparked a relief rally in stocks and bonds.

The economy added 262,000 jobs last month, slightly more than the average forecast but less than the high-end estimates being bandied about at midweek. It seems Federal Reserve Chairman Alan Greenspan hit it about right on Wednesday when he said the economy was "expanding at a reasonably good pace."

Stock investors liked the reasonableness and opened stronger after the report and -- unlike the prior three days -- managed to build on those gains. In fact, all the up and down earlier had left the major indices about unchanged, so Friday's rally defined the week.

The Dow Jones Industrial Average ended Friday up 1% at 10,940.55, its highest close since June 2001 and a 0.9% gain for the week. The S&P 500 also gained 0.9% for the week, including a 1% jump on Friday, to finish at 1222.12. And the Nasdaq Composite rose 0.3% for the week, after a 0.6% gain on Friday, to close at 2070.61.

Basic materials, those cyclical companies that benefit most from accelerating growth, led the end-of-week move. Gold, coal, steel and forestry companies were at the very top. Weyerhaeuser (WY) jumped 4%, Peabody Energy (BTU) added 2%, Nucor(NUE) gained 5%, and Newmont Mining (NEM) rose 3%. Those are also industries that have been helped by surging commodity costs amid the weaker dollar.

Above-Potential Growth

Despite the optimism sparked by the jobs report, one has to go back only to October to see a similar level of job creation. The pre-Halloween 282,000 job surge sputtered quickly, and job growth averaged only 140,000 a month for the next three months. Whether February marks the start of a stronger trend remains to be seen, although all the pieces are in place.