Stock markets shake off gloomy job report

The stock market showed some signs of stability Friday, closing mostly higher despite a report showing the biggest monthly decline in jobs in five years.

Although the net loss of 80,000 jobs, the most since March 2003, sent some investors fleeing into government bonds, the report appeared to merely confirm widespread assumptions of a broad economic slowdown. Indeed, some investors were relieved the total was not higher. Estimates of the job loss had ranged widely to as high as 150,000.

The Labor Department also revised its figures for positions lost in January and February, increasing the total of jobs cuts that month by 67,000. And the unemployment rate shot up to 5.1%, the highest since September 2005. The economy has given up about 232,000 jobs so far this year, and the latest report buttresses the belief of many economists that the U.S. is already in recession.

“The economic data is negative, but I think what the market’s telling us is we’ve priced in a lot of the bad news already,” said Arthur Hogan, chief market strategist at Jefferies & Co. “You could make the argument that we’ve thrown a lot of difficult news at this market, and it’s reacted very well.”

The next big test is likely to come with the release of first-quarter earnings reports in the coming weeks. Investors will be particularly keen to hear companies’ forecasts for the rest of the year. If they are disappointing, Wall Street could see a return of the punishing volatility of the last few months.

The Dow Jones industrial average slipped 16.61 points, or 0.1%, to 12,609.42. But broader stock indicators advanced. The Standard & Poor’s 500 index added 1.09 points, or 0.1%, to 1,370.40, and the Nasdaq composite index climbed 7.68 points, or 0.3%, to 2,370.98.

The Russell 2,000 index of smaller-company stocks edged up 0.16 of a point to 713.73.

Advancing issues outnumbered decliners by about 5 to 4 on the New York Stock Exchange.

Friday marked the end of a strong week for stocks, including the first four days of the second quarter.

So far in the quarter, the Dow is up 2.8%, the S&P; 500 has gained 3.6%, the Nasdaq has added 4% and the Russell 2,000 is up 4.5%.

For the entire week, the Dow rose 3.2%, the S&P; 500 added 4.2%, the Nasdaq gained 4.9% and the Russell 2,000 climbed 3.7%.

In the bond market, Treasury yields sank Friday after the job report. The yield on the benchmark 10-year T-note tumbled to 3.47% in late trading from 3.59% late Thursday.

Dividend-paying stocks, which often trade like bonds, rallied as Treasury yields decline. The S&P; 500 Utilities index, which has a 3.2% dividend yield, climbed 0.5%.

The dollar was mixed against other major currencies, while gold prices rose.

Oil prices climbed $2.40 to $106.23 a barrel in New York.

The job report bolstered expectations of another interest-rate cut by the Federal Reserve at its next meeting, scheduled for April 30.

Trading in interest-rate futures Friday implied a 40% chance of a half-point cut in the Fed’s key rate this month, double the odds on Thursday. The indicated odds of at least a quarter-point reduction were 100% both days.

And the stock market is taking into account that the Fed’s actions take some time to affect the economy, Hogan said.

“The unemployment rate will go higher before the recession is over,” he said. “I think the market is trying to tell us, ‘We understand that. We’ve seen this before.’ ”

In other market highlights:

* MBIA retreated 68 cents to $13.61. The bond insurer would need as much as $3.8 billion in additional capital to deserve a triple-A rating, Fitch Ratings said.

* Washington Mutual fell $1.32, or 11%, to $10.17 for the biggest decline in the S&P; 500. Analysts at Keefe, Bruyette & Woods Inc. wrote in a research note that higher credit losses would cause a wider-than-expected loss at the largest U.S. savings and loan this year and would erode earnings in 2009.

* Bank of America fell 96 cents to $39.41 after JPMorgan cut its estimate of the banking giant’s 2008 earnings and said the company could report $5.4 billion of debt-related write-downs for the first quarter.

* General Motors fell $1.01, or 4.7%, to $20.58 after a private equity group said it ended an agreement to invest $2.55 billion in Delphi, the largest supplier of auto parts to GM. Delphi is trying to emerge from bankruptcy protection.

* Overseas, key stock indexes advanced 0.9% in Britain, 0.3% in Germany and 0.3% in France. Japanese shares declined 0.7%.