Blue Chips Turn Red Hot - TheStreet

Updated from 4:05 p.m. EST

Stocks closed sharply higher Friday, with the

Dow

and

S&P 500

touching their highest levels since June 2001, after the February employment report showed strong job growth but no upward pressure on wages.

The Dow Jones Industrial Average closed up 107.52 points, or 0.99%, to 10,940.55, having traded as high as 10,962.42; the blue-chip index last closed above the 11,000 level on June 7, 2001, when it finished at 11,090.74. The S&P 500 added 11.65 points, or 0.96%, to 1222.12, while the

Nasdaq

rose 12.21 points, or 0.6%, higher to 2070.61, still 105 points shy of its 2004 closing high.

All three indices closed higher on the week, with the Dow and S&P leading the way. The Dow gained 0.9%, the S&P 500 added 0.88%, and the Nasdaq rose 0.25%. Both the Dow and S&P broke through resistance levels that they failed to breach earlier in the week.

Closing volume on the

New York Stock Exchange

was a modest 1.64 billion shares, with advancers beating decliners by a ratio of about 3-to-1. About 1.82 billion shares changed hands on the Nasdaq, with advancers outpacing decliners 9-to-7.

In other markets, the 10-year Treasury note rose, as traders welcomed the absence of price pressure in the February labor numbers. The benchmark bond was recently up 16/32 to yield 4.32%, reversing a recent slump. The dollar strengthened against the euro but remained lower vs. the yen.

"Today, we had a strong economic report for the first time in months with no inflationary prospects when looking at the wage growth," said Barry Hyman, equity market strategist with Ehrenkrantz King Nussbaum. "Employment growth is strengthening, which will filter through better economic growth. Technically, the market has taken out important resistence levels that have been in place for months, so broad strength exists. The only negative I see today is the relative underperformance of the Nasdaq. You have an up market with strong bonds and it should still point higher."

Nonfarm payrolls rose by 262,000 in February, about 40,000 more than expected, while the unemployment rate rose to 5.4%. Average hourly earnings were unchanged. January's payroll gain of 146,000 was revised lower to 132,000, but the reduction was offset by gains in December.

"It's encouraging news for the economy, without a doubt," said Richard Yamarone, chief economist with Argus Research. "I can't help but caution investors that one strong month does not a trend make. We get one strong number and people seem to forget all the data we've had. You won't see 260,000 every month, and I question the sustainability given the reduced GDP expectations."

February's payroll increase was the largest since October, but the closely watched economic series has been unusually volatile and difficult to forecast in the past couple years.

The April crude contract closed up 21 cents at $53.78, a 4.4% gain for the week. The contract briefly traded above its all-time closing high of $55.17 during Thursday's session.

"There are comments that a trading firm buying oil went from short to long on the potential of another snowstorm in the east," added Sheldon. "As long as oil stays below yesterday's high, investors can overlook it. If we see a rise to a new all-time high, you could see stock prices pull back as we head to the close."

The Dow was led by advances in

Alcoa

(AA) - Get Report

,

Caterpillar

(CAT) - Get Report

and

DuPont

(DD) - Get Report

, all of which were all up around 2% at Friday's close. The Nasdaq was led by

Closure Medical

(CLSR)

, up 19.1% after

Johnson & Johnson

(JNJ) - Get Report

agreed to purchase the company for $370 million in cash.

The battle for control of

MCI

(MCIP)

continues to make news, with the latest report, from

Bloomberg

, quoting Mexican billionaire Carlos Slim badmouthing acquisition offers from

Verizon

(VZ) - Get Report

and

Qwest

(Q)

. Slim, the telecom's biggest holder, called the Verizon bid "too low" and Qwest's offer "better" but "insufficient." Shares of MCI added 11 cents, or 0.5%, to $23.66.

Martha Stewart left a federal prison in West Virginia and returned to her home in Bedford, N.Y., early Friday morning after serving a five-month sentence. She will now serve another five months of home detention. Shares of

Martha Stewart Living Omnimedia

(MSO)

, having more than tripled since the day she was sentenced, lost $3.20, or 9.4%, to end at $30.75.

Biogen Idec

(BIIB) - Get Report

and its partner

Elan

(ELN)

were down Friday after confirming a second case of a patient developing the rare and often fatal central nervous system disease called progressive multifocal leukoencephalopathy, or PML.

The two had pulled their much-hyped multiple sclerosis drug Tysabri from the market Monday because a patient died after taking it for two years with another Biogen drug, Avonex. Shares of Biogen fell $1.80, or 4.6%, to $37.53; they had closed last week at $67.28. Shares of Elan dropped 94 cents, or 14.1%, to $5.71; they had closed last Friday at $26.90.

McDonald's

(MCD) - Get Report

also aided the Dow's climb after Smith Barney said it believes that the fast food company's U.S. same-store sales for February came in "meaningfully higher" than expectations. Shares gained 55 cents, or 1.7%, to $33.96.

Circuit City

(CC) - Get Report

said Friday that fourth-quarter revenue climbed 5.3% to $3.47 billion while same-store sales dropped 1.8%, losing further market share to rival

Best Buy

(BBY) - Get Report

. However, the retailer changed its methodology for calculating same-stores sales, adding extended warranties, installations and other nonmerchandise revenue. Using the old calculating method, same-store sales were down 2.9%. Shares of Circuit City rose 41 cents, or 2.6% to finish at $16.12.

Saks

(SKS)

posted fourth-quarter net income of $94.8 million, or 67 cents a share, compared with $80.6 million, or 56 cents a share, a year ago, meeting analysts' expectations, according to Thomson First Call. However, the company also said it has received an informal inquiry by the

Securities and Exchange Commission

, after announcing an internal investigation into alleged improper collections of vendor markdown allowances in one of its merchandising divisions. Saks will also restate earnings due to accounting errors regarding previously recorded operating losses. Shares were down 58 cents, or 3.7%, to close at $15.02.

Dell

(DELL) - Get Report

said late Thursday it would buy back an additional $10 billion in company stock, or about 250 million shares. Shares added 87 cents, or 2.2%, to $40.87.

After the bell Thursday,

Take-Two Interactive

(TTWO) - Get Report

said first-quarter earnings rose 75% from a year ago to $55.23 million, or $1.19 a share, beating estimates by a dime. The company guided earnings lower for the next two quarters, however, citing a rising investment expense. Shares of Take-Two rose $2.11, or 5.6%, to $39.53.

Maxtor

(MXO)

will cut up to 5,500 jobs at its Singapore manufacturing operation as part of a plan to shift production to China. In a filing with the SEC, the disk-drive producer said it expects to cut 2,500 jobs by attrition and the remainder by severance, incurring an estimated charge of $12 million in the current quarter. Maxtor gained 10 cents, or 1.7%, to $5.90.

In brokerage action, Banc of America downgraded

ChevronTexaco

(CVX) - Get Report

,

Marathon Oil

(MRO) - Get Report

and Norway's

Statoil ASA

(STO)

to neutral from buy, citing the belief that recent gains from rising crude oil prices leave limited upside potential to the stocks. Still, ChevronTexaco was up 52 cents, or 0.8%, to end at $61.71; Marathon Oil gained 76 cents, or 1.6%, to $48.76; while Statoil ASA added 51 cents, or 2.9%, to $18.35.

Apple Computer

(AAPL) - Get Report

helped tech stocks after brokerage Prudential raised its sales and EPS estimates for the company on the belief that the company's first quarter is beating expectations on strong demand. Apple rose $1.02, or 2.4% to $42.81.

Overseas markets were mixed, with London's FTSE 100 finishing up 0.3% at 5028 and Germany's Xetra DAX adding 1.1% to 4419. In Asia, Japan's Nikkei rose 0.1% to 11,873, while Hong Kong's Hang Seng lost 1.2% to 13,730.