NEW YORK – Stocks extended their gains Friday after a court ruling favorable to the tobacco industry boosted cigarette shares while a weaker-than-expected jobs report eased concerns about faster interest-rate hikes.
A brokerage upgrade helped the semiconductor sector and soothing comments by Federal Reserve Chairman Alan Greenspan (search) alleviated fears about the record U.S. trade deficit.
The Dow Jones industrial average (search) rose 123.03 points, or 1.16 percent, to 10,716.13. The Standard & Poor's 500 Index (search) was up 13.14 points, or 1.10 percent, at 1,203.03. The Nasdaq Composite Index (search) was up 29.02 points, or 1.41 percent, at 2,086.66.
The S&P closed at a high for the year and all three indexes posted their best percentage gains this year.
All three rose for a second straight week. The Dow ended up 2.8 percent, the S&P rose 2.7 percent and Nasdaq climbed 2.5 percent. In terms of gains in points for the week, the Dow added 288.93 points, the S&P gained 31.67 points and Nasdaq rose 50.83 points.
Tobacco companies jumped after a U.S. appeals court rejected the government's bid to force cigarette makers to pay billions of dollars in past profits as part of its racketeering case against the industry.
Altria Group Inc. (MO), which owns Philip Morris USA, rose 5 percent, or $3.26, to $67, while Reynolds American Inc. (RAI), the parent of R.J. Reynolds Tobacco Co., surged 4.5 percent, or $3.69 to $85.60.
The markets opted for a glass-half-full approach to the Labor Department's job creation report, which showed just 146,000 new jobs last month, far less than the 200,000 expected. December's job gains were revised downward to 133,000 from the 157,000 reported a month ago.
While such a disappointing report has driven stocks lower in the past, the numbers assuaged investors' fears that inflation would become an issue. With the economy growing at a tepid rate, inflation is unlikely to be a factor, and the Federal Reserve's modest stance on raising interest rates would remain unchanged.
"I certainly think this (jobs) report provides no reason for the Fed to turn more aggressive in its tightening. That's because while it's creating jobs, the economy is not booming and there's not a lot of labor-cost pressure in the system," said Richard Rippe, chief economist at Prudential Equity Group in New York.
Traders said the market also got a boost from Fed Chairman Alan Greenspan's comments at a conference hosted by the British Treasury. The Fed chairman said that market forces and promised action by Washington to cut its budget deficit look set to stabilize, and could cut, the record U.S. trade gap.
The week's good news — successful elections in Iraq, no surprises from the Fed on interest rates and falling oil prices — prompted much of the gains and helped investors put Friday's jobs report in perspective, analysts said. Economic growth, without inflationary pressures, could be healthier for the economy in the long-term, not to mention better for stock prices.
Semiconductor shares got a boost after Prudential Equity Group raised its investment rating on the sector and upgraded Texas Instruments Inc (TXN), the world's largest maker of chips for cell phones. Texas Instruments rose 7 percent, or $1.62 to $24.75.
"The semiconductor companies are all almost uniformly saying that they've seen the bottom in their bookings, and they started picking up in December and January," Ray Rund, managing director and head of research at ShakerInvestments. "Things aren't as bad as they thought. It's a change in sentiment, but I don't know how significant it is or how long it will last."
The Philadelphia Stock Exchange semiconductor index climbed 4.36 percent.
Of the few companies releasing fourth-quarter results Friday, media giant Time Warner Inc. (TWX) was down 6 cents at $18.10, though it beat expectations with profits that nearly doubled.
Home builders rose after the yield on 10-year Treasury notes fell. Since home mortgage rates are tied to the 10-year yields, their shares gained on the prospect of stronger home sales. Pulte Homes (PHI) climbed 6.6 percent, or $4.38 to $70.72 and KB Home jumped 3.8 percent, or $4.22 to $116.22.
Human resources firm Hewitt Associates Inc. (HEW) was up $2.19 at $31.28 after reporting its first-quarter earnings rose 16 percent.
Cardinal Health Inc. (CAH) fell 3.2 percent, or $1.91 to $58.18 after the company, which has been the subject of a federal accounting investigation, said it fired some employees following an internal accounting probe. It also reported lower-than-expected quarterly profit.
Overall, trading was active, with 1.59 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.86 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.
Advancers outnumbered decliners on the New York Stock Exchange by 13 to 4 and by about 2 to 1 on Nasdaq.
The Russell 2000 index of smaller companies was up 8.13, or 1.3 percent, at 637.45.
Overseas, Japan's Nikkei stock average fell 0.25 percent. In Europe, Britain's FTSE 100 closed up 0.68 percent, France's CAC-40 rose 0.74 percent for the session, and Germany's DAX index gained 1.35 percent.
Reuters and the Associated Press contributed to this report.