Jobs Report Fires Up Wall Street; Dow Climbs 114

Never has losing 247,000 jobs in the span of just four weeks looked so good.
Buoyed by that figure and the first drop in the unemployment rate in 15 months, stocks were off to the races Friday as Wall Street’s recovery hopes received a big shot of confidence. Friday’s rally started when the Labor Department said the U.S. lost 247,000 jobs in July, an historically-high figure but well below economists’ forecast for a loss of 300,000 jobs. It’s also the lowest figure since August 2008 and considerably better than the average of almost 700,000 jobs lost each month in the beginning of 2009.

At the same time, the unemployment rate unexpectedly fell from 9.5% in June to 9.4% last month. That could further boost market sentiment as some had feared unemployment would eclipse the psychologically-important 10% threshold as early as July.

Today’s Markets
The Dow Jones Industrial Average rose 113.81 points, or 1.23%, to 9370.07, the Standard & Poor's 500 added 13.40 points, or 1.34%, to 1010.48 and the Nasdaq Composite picked up 27.09 points, or 1.37%, to 2000.25. .
Handed the clearest sign yet that the recession is at or near an end, Wall Street bid up stocks for the fourth consecutive week. The latest rally, which came on top of the best July in two decades, left the S&P 500 at its highest level since early October, which coincided with the height of the credit crisis that destroyed trillions of dollars of market value.

Despite the gigantic gains on Wall Street, there are still those who say the rally is built on sticks and stocks have risen too far, too fast.

“The last time that chorus was heard -- and it was pretty much unanimous -- was five weeks ago. What’s happened since then? We put in the best July in two decades,” said Kenny - a Wall Street dealer.

Underscoring the increased risk appetite on Wall Street, cash cycled out of the bond markets on Friday, sending the yield on the 10-year note to its highest level since June 11.

Despite the economic optimism, crude failed to join the rally as the dollar soared more than 1% on the jobs report. Crude fell $1.01 a barrel, or 1.4%, to $70.93.

Now that earnings season is coming to a close, the jobs report is out of the way and politicians in Washington are on recess, it’s not clear what the next driver for the markets will be. Despite his bullishness, Kenny preaches caution.

“Recent history has suggested that August surprises those who become complacent,” said Kenny, alluding to the collapse of Lehman Brothers last September that nearly caused a Depression. He urged investors “not to ring the cash register but cover yourself in the event there’s some unforeseen market trigger that forces it lower.”

“The bottom line is we are in full go mode right here. Everything is clicking: financials, the dollar, lower energy,” said Peter Kenny, managing director at Knight Capital Markets. “The fundamentals are going to catch up with market valuations. That’s what the market is telling us.”

Friday's data clearly lend credence to Wall Street’s summer surge, which has pushed the markets more than 50% above their March levels on hopes for a second-half economic recovery.

“As long as the economic data continue to come in better, we really do see more upside for the market. We still think there is fuel in there,” said Ryan Detrick, equity analyst at Schaeffer’s Investment Research. “If it keeps going up, it can be a self-fulfilling prophecy as the money continues to chase this market.”

Global Markets
Thanks to the jobs report, European markets capped off their fourth consecutive week of gains in the green. London's FTSE 100 rose 0.87% to 4731.56, Germany's DAX climbed 1.66% to 5458.96 and France's CAC 40 advanced 1.25% to 3521.14.

Asian markets closed mixed as Japan's Nikkei 225 gained 0.23% but Hong Kong's Hang Seng slid 2.51% to 20375.37.

Oil prices dip amid US dollar rise
Oil prices declined on Friday as a stronger US dollar muted the impact of better-than-expected jobs data in the United States, the world's biggest energy-consuming nation.
New York's main contract, light sweet crude for September, shed $US1.01 to $US70.93 a barrel, after hitting a five-week high of $US72.42 on Thursday.
Analysts said prices fell when the dollar climbed against key currencies in reaction to data showing US job losses slowing amid tentative signs of a recovery in the world's biggest economy.
Oil is priced in the US currency and becomes more expensive when the dollar rises.
But the surge in the dollar on Friday in reaction to the positive US jobs data surprised some as the currency has mostly been regarded as a safe haven unit often rising when economic data dampened hopes of recovery from recession.

"Oil prices have fallen victim to a rising dollar," said a NYMEX oil trader.

Oil prices had rallied this week as a weakening dollar made crude futures an attractive investment option, traders said.

Data released on Wednesday by the US Department of Energy painted a mixed picture of US oil demand.

Just over a year ago, oil prices had struck record peaks above $US147 a barrel on worries about potential supply disruptions. But over the past 12 months, prices nosedived, striking $US32 in December before clawing back ground in recent months.