NEW YORK – Stocks rose Friday after another weak report on unemployment added to expectations that the Federal Reserve will step in to prop up the economy.
The Dow Jones industrial average climbed above 11,000 Friday for the first time since early May. It rose 71 points in afternoon trading.
High unemployment remains a major hurdle as economic growth continues to be sluggish. The Labor Department’s report, considered the most important piece of news on the economic calendar, did little to alter the view that the economy remains weak.
While job creation remains scarce, however, there could be a silver lining. Expectations are growing that the Federal Reserve will try to stimulate the economy by stepping up its purchases of government bonds. The gloomy jobs report could give the Fed more incentive to act.
Jason Pride, director of investment strategy at wealth management firm Glenmede, said “by not being stronger, (the jobs report) gives them the window of opportunity to take action.”
Anticipation of the Fed making a move has driven bond yields and the dollar sharply lower in recent days. Bond yields fell again Friday after the jobs report was released. The yield on the two-year note hit a new record low, but the dollar crept slightly higher.
The Fed’s goal, if it starts buying bonds again, would be to drive interest rates down further from their already low levels and spark borrowing and spending. Lower rates could also eventually drive investors into riskier assets like stocks or into currencies in countries with more attractive interest rates.
Scott Brown, a senior vice president and chief economist at Raymond James &Associates, predicted the Fed would announce a specific plan when it wraps up its next meeting Nov. 3. But Brown warned not to expect an immediate improvement in the economy after the Fed starts buying bonds again.
“It’s a long process. It doesn’t happen overnight,” Brown said. “The key factor in a recovery is time.”
The Dow rose 71.48, or 0.7 percent, 11,019.98 in afternoon trading. It has not traded above the psychological 11,000 barrier since May 4 just days before the “flash crash” spooked investors and added to a broad sell-off during the spring.
The Standard & Poor’s 500 index rose 7.79, or 0.7 percent, to 1,165.85, while the Nasdaq composite index fell 16.39, or 0.7 percent, to 2,400.06.
About two stocks rose for every one that fell on the New York Stock Exchange where volume came to 401.8 million shares.
The yield on the 10-year Treasury note, which helps set rates on loans including mortgages, fell to 2.36 percent from 2.38 percent late Thursday.
The dollar rose slightly against other currencies, stemming its recently decline. Gold rose to 1,234.57€ an ounce after falling earlier in the day. Gold has been soaring as traders consider it a safe alternative to the dollar.
The dollar hit an eight-month low against the euro Thursday and has recently touched a 15-year low against Japan’s yen. It has been under pressure because traders expect any action by the Fed would effectively add billions of dollars into the currency market.
The government said private employers added 64,000 workers last month, short of the 75,000 economists expected. Overall, 95,000 jobs were slashed as governments laid off workers, including temporary census employees.
The unemployment rate held steady at 9.6 percent in September. Economists polled by Thomson Reuters were expecting it to rise to 9.7 percent.
Employers have not started hiring a lot of workers because of worries about potential tax hikes and unknown costs associated with health care and financial regulatory reform passed earlier this year. Consumers have also kept their spending down, which has kept a lid on hiring.
In corporate news, Alcoa Inc. rose 6.9 percent after its earnings beat analysts expectations late Thursday. The aluminum maker also raised its forecast for global aluminum consumption. Many companies have said international operations will be the driving factor in improving profits in the coming quarters because U.S. growth is so slow.
Alcoa is seen as a bellwether for earnings season because it is the first company among the 30 that make up the Dow Jones industrial average to report earnings. Alcoa rose 84 cents, or 6.9 percent, to 11.96€.
Earnings are likely to become more of a factor in the market’s movement in the coming weeks as hundreds of companies report results.
Carole Peck, president and founder of Carole Peck Financial Center, said “if we see positive earnings and projections for the fourth quarter are fairly decent, that should play positively.”
Strong earnings results and upbeat corporate outlooks drove the Dow up 7.1 percent in July.
Overseas, Britain’s FTSE 100 fell 0.1 percent, Germany’s DAX index rose 0.3 percent, and France’s CAC-40 slid 0.2 percent. Japan’s Nikkei stock average fell 1 percent.