NEW YORK – Indexes gained Friday as investors applauded a White House shakeup on hopes the changes boded well for economic growth, but a surprisingly weak report on the job market kept a lid on enthusiasm.
The Dow Jones industrial average advanced 22.49 points, or 0.26 percent, to close at 8,645.77, based on the latest available figures. The technology-laced Nasdaq Composite Index was up 11.69 points, or 0.83 percent, at 1,422.44, while the broader Standard & Poor's 500 Index gained 5.68 points, or 0.63 percent, to 912.23.
For the week, the Dow dropped 2.8 percent, the S&P 500 declined 2.6 percent and the Nasdaq lost 3.8 percent.
The market fell after data showed the U.S. unemployment rate shot up to 6 percent in November and employers chopped payrolls by the largest amount since February. But indexes erased losses as word of the resignations of Treasury Secretary Paul O'Neill and White House economic adviser Lawrence Lindsey filtered throughout Wall Street.
The resignations are a good thing for the economy," said Bill Strazzullo, a market strategist with State Street Global Markets. "I don't think the market had much faith in O'Neill because of his inability to articulate a strategy for the dollar and his general ineptness."
"(President Bush had a very disjointed economic team. We really need to get a team with a single voice that is focused on critical issues," said Bob Bissell, president of Wells Capital Management.
O'Neill quit "at the request of the White House," according to an administration official. The shake-up seemed aimed at helping shield the White House against what could be a key weakness during the 2004 presidential election season -- a public view that the shaky economy was not in skilled hands.
"The feeling is that the person who will be appointed will probably be an improvement from the perspective of the financial markets (because) they would focus on getting the economy growing at a faster rate," said Joseph Stocke, chief investment officer at StoneRidge Investment Partners. "There was a feeling that things weren't going as well as they should have and a change should improve that."
The resignations helped take the sting out of the jobs report. The jobless rate hit its highest level since April, vaulting to 6 percent from October's 5.7 percent and surpassing expectations for a rise to 5.8 percent. The number of workers on U.S. payrolls outside the farm sector fell by 40,000 last month, vs. an expected gain of 38,000.
It shows "that the recovery is still sluggish and is expected to continue to be sluggish," said Edgar Peters, chief investment officer at PanAgora Asset Management, which manages $12 billion. "So we will have slow economic growth and probably even slower profits growth."
Declines in International Business Machines Corp. (IBM) limited the Dow's gain after Salomon Smith Barney cut its investment rating on the world's largest computer maker to "in-line" from "outperform," saying shares were expensive, given the company's outlook.
IBM fell 74 cents to $82.32 after Salomon cut its rating on the stock.
Separately, the company said it planned to buy Rational Software Corp. (RATL) to expand its position in the market for tools that companies use to make customized software. IBM said it would pay about $10.50 per share, a premium of 28 percent over Rational's Thursday closing share price.
Rational jumped $2.12, or 26 percent, to $10.29 and ranked as one of the most active shares on the Nasdaq.
Investors cheered the debut of Chicago Mercantile Exchange Holdings Inc. (CME), the first major U.S. financial exchange to go public. Shares soared $7.90, or 23 percent, to $42.90 in trading on the New York Stock Exchange.
It is expected to be a record year for CME's trading volume as investors buy and sell more derivatives to hedge against market swings.
Intel Corp. (INTC), the world's largest computer chip maker, shed 25 cents to $18.71. Intel, one of the biggest names traded on Nasdaq and one of the 30 stocks that make up the Dow, raised its fourth-quarter revenue outlook slightly above analysts' expectations, citing higher sales in Asia and stronger demand for its microprocessors.
While analysts said they were pleased Intel's fourth quarter would be better than previously forecast, they also noted that the quarter typically is strong due to holiday sales. Analysts also said they were concerned about how the industry will fare next year following a two-year downturn.
The U.S.-traded shares of French mobile phone module maker Wavecom were among the biggest percentage losers on the Nasdaq after the company slashed its sales forecasts after a key customer canceled major orders and said it would buy fewer products in the future, sending its shares crashing.
Wavecom ADRs tumbled $15.60, or more than 50 percent, to $15.50.
Advancing issues outnumbered decliners 5 to 4 on the New York Stock Exchange. Volume was light.
The Russell 2000 index, which tracks smaller company stocks, rose 2.27 to 396.72.
Overseas, Japan's Nikkei stock average finished 0.6 percent lower Friday. In Europe, France's CAC-40 rose 0.9 percent, while Britain's FTSE 100 dropped 0.5 percent and Germany's DAX fell 0.5 percent.
Reuters and the Associated Press contributed to this report.