Stocks Climb on Jobs Report; Rates Inch Up

Market Overview * Stocks staged a convincing rally at the end of a volatile week, as the good news of healthy employment in February overcame another day of higher interest rates in the bond market. Small stocks led the market.

* Yields on short-term Treasury securities jumped after the employment report, but long-term yields rose only slightly.

Stocks

Stocks rose broadly as bargain hunters continued to comb the market after recent sharp price declines.

The Dow industrials added just 7.88 points to 3,832.30, but Wall Street’s tone was better than what the Dow implied.

Winners topped losers 13 to 8 on the New York Stock Exchange, the best breadth since Monday.

And smaller stocks rebounded sharply. The Russell 2,000 index of smaller issues gained 1.56 points to 264.71 and now is just 1% away from its all-time high. The Russell rose 1.71 points for the week, despite the turmoil caused by surging interest rates.

In contrast, the Dow lost 6.48 points for the week and remains off 3.7% from its peak.

Investors Friday focused on the reported drop in unemployment in February, which suggests continuing strength in the economy--a precursor to higher corporate profits.

Traders were impressed with the stock market’s resilience even as rumors swept Wall Street that the Federal Reserve Board may be poised to tighten credit again.

Many analysts have argued that despite rising interest rates, the stock market’s rally can continue because rising corporate profits will support share prices.

Among Friday’s highlights:

* Industrial issues, which have the most to gain from a strong economy, were swept up. Ford, Chrysler and GM each gained 1 1/2 points for the day, to 65 1/8, 59 1/2 and 62, respectively.

Other gainers included Eaton, up 1 1/2 to 59 1/2; Cummins, up 1 to 47; Ingersoll-Rand, up 1 1/4 to 38 7/8, and Dow Chemical, up 2 1/4 to 64 1/2.

* Technology and telecommunications stocks were also in demand. Scientific Atlanta surged 3 1/2 to 31 1/8, Intel gained 1 5/8 to 69 5/8, Tellabs leaped 3 to 57 3/4, Ericsson added 1 1/8 to 45 7/8 and Texas Instruments was up 1 1/4 to 84 5/8.

* Salomon rose 1/2 to 49 5/8. After the market closed, investor Warren Buffett announced that he has raised his stake in the brokerage to 19% from 14.3%.

* Gibson Greetings eased 1/4 to 23. After the market closed, the greeting card maker disclosed that it has lost $3 million as a result of unauthorized transactions in interest rate swaps, a type of so-called derivative security. The company did not say how the trades occurred.

Overseas markets were strong for a change. Tokyo’s Nikkei index gained 360.14 points to 19,966.00. In Frankfurt, the DAX index added 22.19 points to 2,060.09, and London’s FTSE-100 index rose 31.5 points to 3,278.0.

But buyers continued to hold back in Mexico City, where the Bolsa index added just 7.59 points to 2,569.52.

Other Markets

Short-term yields finished sharply higher on the heels of the February employment report, as investors bet that another Federal Reserve rate hike is near.

The yield on three-month Treasury bills closed at 3.62%, up from 3.56% on Thursday and 3.48% on Monday. Traders said the rise indicates that the market expects the Fed to boost short-term rates at least a quarter of a point again soon, matching its Feb. 4 increase.

But longer-term yields were up only slightly or flat Friday. The 30-year T-bond yield closed at 6.83%, unchanged from Thursday, though it hit 6.88% during trading.

Some traders believe that the next Fed hike in short-term rates could actually help longer-term yields fall, if investors believe that the Fed’s stated goal will be met: to keep the economy’s growth, and thus inflation, moderate.

But Nicholas Sargen, portfolio manager at Global Advisers, admitted that “it’s got to be a bold person who says rates in the U.S. have peaked and the market is ready to rally.”

Elsewhere:

* The dollar rallied on optimism about the economy. In New York, it fetched 105.50 Japanese yen, up from 103.80 on Thursday, and 1.719 German marks, up from 1.710.

* The economic news helped push copper prices up 2 cents to 89.55 cents a pound, an eight-month high. But among precious metals, gold added just 30 cents to $377.60 an ounce on the Comex; silver eased 0.2 cent to $5.24.

Market Roundup, D4