SAN FRANCISCO -- Joy to the bulls.
employment report provided investors a much-needed excuse to buy beaten down "old economy" stocks, sending the
Dow Jones Industrial Average
sharply higher today. With just about everything of late proving an excuse to buy technology stocks, the data not surprisingly helped the
Nasdaq Composite Index
soar to its highest close yet.
reported nonfarm payrolls grew 43,000 in February, the smallest increase since May 1999 and vs. expectations for a more robust tally of 206,000. The unemployment rate rose to 4.1% vs. 4% in January. Average hourly earnings rose 0.3%, in line with expectations.
The report did not dispel the widely held belief that the
will raise interest rates at its March 21 meeting, but it calmed lingering concerns about a 50-basis-point hike. It also cheered investors concerned that tight labor markets would compel the central bank to continue raising interest rates for many months thereafter.
"The psychology has been 'they'll be raising rates forever.' Now it doesn't look that way," said Tony Dwyer, chief market strategist at
. "Today's number changes the landscape."
However, Bruce Steinberg, chief economist at
, took a less sanguine view.
"In our view, this data was essentially a correction for the last two reports," Steinberg wrote this morning. "Job growth for the last three months averages 245,000 per month, still well above what the Fed considers desirable, in our view."
The jobless rate will "probably" fall below 4% in the coming months, Steinberg predicted, suggesting the Fed will maintain an aggressive stance.
But for one day -- at least -- those concerns were cast aside.
After rising as high as 10,443.52, the Dow closed up 202.28, or 2%, to 10,367.20, continuing its comeback from a big slide highlighted by
last Friday's close below 10,000.
The index's fifth consecutive gain was inspired by strength in technology components such as
, and economically sensitive names such as
We Have Tech, We Have Liftoff
With its large-cap heavyweights such as
rising in concert with smaller names, the Nasdaq jumped 160.26, or 3.4%, to 4914.77. The point gain is the Comp's third-biggest ever and led to the index's 14th record of 2000. And yes, it's just 85.23 points from 5000.
rose 4.9%, the
Morgan Stanley High Tech 35
rose 3.8%, and the
Philadelphia Stock Exchange Semiconductor Index
jumped 6.6%; each established an all-time high.
The Comp was further enlivened by gains from smaller tech and biotech names such as
; each rose more than 20%.
Additionally, new issues enjoyed stellar gains, including
, up 309%.
"It's not the big 'new economy' stocks that are driving
the rally, it's the small- and medium-caps," Dwyer said. Most tech bellwethers are "nowhere near new 52-week highs, but the
and Comp continue to make new highs."
Indeed, the Russell rose 13.84, or 2.4%, to 597.88, eclipsing its previous high of 588.35, and the
American Stock Exchange Composite Index
gained 10.21, or 1%, to a record 1013.71.
The action "is a sign of a speculative bubble," Dwyer said, but "until it shows a sign of peaking, there's no gain in trying to predict it."
Historical precedent suggests "there's no doubt this is going to have an ugly ending," he conceded. "But we've been saying that for the last two years
and if you watch the tape it's saying the formula ain't working."
TheStreet.com Internet Sector
index rose 56.99, or 4.9%, to a record 1221.10 behind strength in
, up 10.3% after
upped its price target.
TheStreet.com New Tech 30
rose 73.50, or 9.4% to 855.61, thanks to big gains by
; each set a 2-for-1 stock split. Unveiled Jan. 5, the TSC New Tech 30 is a market-cap-weighted index focusing on tracking the so-called hot money part of the market. A list of index components is available at
Strength Extends Across Industries
rose 27.41, or 2%, to 1409.17 amid broad strength in major industry groups. Standouts included the
Morgan Stanley Cyclical Index
, up 2.8%, the
American Stock Exchange Broker/Dealer Index
, which rose 3.4%, and the
American Stock Exchange Biotech Index
, higher by 6.4%.
"We certainly saw a recovery in cyclicals but I don't think it's going to be long-lived," said Rob Cohen, co-head of listed trading at
Credit Suisse First Boston
. "It wasn't like people were selling the techs to buy cyclicals
and I can't imagine one day's economic statistics are going to take people of Fed death watch."
Still, the action today was a "powerful statement" as to the "amount of cash" ready to be put to work on favorable news, Cohen said.
AMG Data Services
reported that $10.3 billion flowed into equity funds for the week ended March 1, with nearly half into small-cap and aggressive growth funds.
Also, "a fair amount of shorts anticipating another weak Friday" were squeezed by upward tide, the trader said.
New York Stock Exchange
trading, 1.155 billion shares were exchanged while advancers led declining stocks 1,713 to 1,252. In
Nasdaq Stock Market
action 2.125 billion shares traded -- the third-busiest session ever -- while gainers led 2,576 to 1,646. New 52-week lows bested new highs 125 to 108 on the Big Board while new highs routed new lows 445 to 84 in over-the-counter trading.
Among other indices, the
Dow Jones Transportation Average
rose 80.52, or 3.4%, to 2434.45; the
Dow Jones Utility Average
added 2.22, or 0.8%, to 290.20.
For the week, the Dow rose 5.1%; the S&P 500 added 5.7%; the Nasdaq Comp leapt 8.4%; the Russell 2000 advanced 7.4%; the DOT jumped 3.8%; the New Tech 30 hopped 10%; the Dow transportation average rose 3.5%; the Dow utility average rose 3.6%; and the Amex composite added 7.4%.
Palm Holders All Sweaty
Missing out on the tech rally was
, which fell 15.6% following
yesterday's big IPO.
Still, Palm has a market-cap of $45.1 billion vs.
, which still owns 94.8% of Palm shares but has a market cap of $28.4 billion. 3Com rose 1.4% today.
The discrepancy remains a hot topic among Wall Street pros.
"Anybody interested in owning Palm is much better off buying shares of 3Com, as long as you believe they'll follow through with their promise" to divest the Palm shares in six months, said David Brail, president of risk arbitrage firm
(and a contributor to this site).
Like many arbitragers, Brail said he'd like to be long 3Com and short Palm, because with 1.55 shares of Palm imbedded in each 3Com share "plus the parent's assets, under no case are you worse off owning 3Com shares."
But that trade is currently impossible because "there's no shares of Palm available to be borrowed," he said, given only 23 million shares were offered to the public yesterday.
More than short-selling, today's decline was a function of the fact Palm "opened at an absurd valuation yesterday and now it's digesting" that move, Brail added.
McCain Rallies on Wall Street
(R., Ariz.), who's running for president, came to Wall Street today to drum up support and rupture eardrums with his massive audio system. Take a
For coverage of today's top stocks in the news, see the Company Report, published separately