Nasdaq at 11-year high as jobless rate falls to 8.3%

Updated: 7 p.m. ET

Stocks surged to multiyear highs today after the government reported the national unemployment rate dropped to 8.3%, a three-year low, as employment grew by more than 2 million since last summer.

The report from the Labor Department was much better than economists had expected. It also showed nonfarm payrolls jumped by the highest amount since April. "This is a game-changer," wrote Ian Shepherdson, chief economist of High Frequency Economics.

The Dow Jones industrials ($INDU) hit their highest level since May 2008. The Nasdaq Composite Index ($COMPX) soared to levels last seen in December 2000. The Standard & Poor's 500 Index ($INX) is off to its best yearly start since 1987. The rally sent a number of stocks to all-time highs, including Panera Bread (PNRA), Alaska Air (ALK), Peet's Coffee (PEET), MasterCard (MA) and shopping-mall operator Simon Property Group (SPG).

The market gains sent most commodity prices higher. Rising employment could boost home construction and increase demand for raw materials such as copper and wood. Crude oil (-CL) was higher in part because of the jobs report but also because of worries of an Israeli-Iran war. Gold (-GC), however, fell back.

The Dow closed up 157 points to 12,862, its first gain of more than 100 points since Jan. 3. The S&P 500 added 19 points to 1,345, and the Nasdaq jumped 46 points to 2,906. The Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, climbed 33 points to 2,529.

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The Dow finished the week with a 1.6% gain. The S&P 500 rose 2.2%, with the Nasdaq up 3.2%. For the year, the Dow is up 5.3%, with the S&P 500 up 6.9% and the Nasdaq up 11.5%.

The gains for the Nasdaq and Nasdaq-100 reflect steady gains for such big tech stocks as Apple (AAPL), Microsoft (MSFT), Oracle (ORCL), Dell (DELL), Netflix (NFLX) and SeagateTechnologies (STX). 

Markets for the week
			2/3/2012			1/27/2012			% chg.			YTD chg.
Dow Industrials			12,862.23			12,660.46			1.59%			5.28%
S&P 500			1,344.90			1,316.33			2.17%			6.94%
Nasdaq			2,905.66			2,816.55			3.16%			11.54%
Russell 2000			831.09			798.85			4.04%			12.17%
Crude oil			$97.84			$99.56			-1.73%			-1.00%
(per barrel)
U.S. Dollar Index			79.06			79.01			0.06%			-1.82%
10-yr. Treasury			1.95%			2.03%			-3.90%			4.17%
Gold			$1,740.30			1,732.20			0.47%			11.07%

A big and pleasant surprise on jobs
The Labor Department said the economy added 243,000 jobs in January, the biggest monthly gain since a gain of 251,000 in April 2011 -- before the effects of the Japanese earthquake, turmoil in the Middle East and Europe, and budget battles in Washington sapped investor and consumer confidence.

Economists had been looking for a gain of 140,000 to 150,000. A few predicted gains of less than 100,000.

The 8.3% unemployment rate was the lowest since February 2009. The number of employed was up 847,000 from December and 2.25 million from June -- gains that were partly due to better population estimates.

One consequence of the jobs report -- if the gains are sustained -- is that it may force the Federal Reserve to raise interest rates perhaps by 2013. The Fed has said it might not push rates higher until late 2014.

The jobless rate has now fallen by 0.8 percentage points in the past six months, the fastest decline since 1984, according to the government. But the economy has recovered only 37% of the 8.6 million jobs lost between January 2008 and February 2010.

The private sector produced just about all of January's job gains. While federal agencies and local governments continued to lay off workers, private-sector employers added 257,000 jobs in January. The industries with the biggest gains were manufacturing, professional and business services, and leisure and hospitality.

There were gains in construction jobs, even a small gain in residential construction jobs.

And the drop in the unemployment rate reflected employment rising faster than the labor force, not people leaving the labor market, noted Nigel Gault, chief U.S. economist at IHS Global Insight.

Although the number of unemployed people has been falling -- about 12.8 million from 13.1 million in December and 13.9 million in January 2011 -- the number is still about equal to the population of Pennsylvania, The New York Times noted.

Long-term unemployment is one of the most crushing legacies of the recent recession. According to an analysis of December’s Labor Department numbers released earlier this week by the Pew Fiscal Analysis Initiative, nearly a third of the jobless have been unemployed for a year or more. In January, the Labor Department reported that 5.5 million people had been out of work for six months or more.

If January's gains can continue, it would still take two years to regain those lost jobs, Philippa Dunne and Doug Henwood of the Liscio Report said in a note to clients. But the head winds are considerable: Europe, China and the potential for deep federal spending cuts.

ISM non-manufacturing is growing, too
As welcome as the jobs report was, a second report reinforced the idea of a strengthening economy.

The Institute for Supply Management said today its nonmanufacturing index rose to 56.8, its best level in a year. A reading above 50 indicates the sector is growing.

"It is quite clear that conditions have improved. But we’re reluctant to get too carried away just yet," wrote Paul Dales of Capital Economics, a British economic consulting firm. "It is worth remembering that the economy began both 2010 and 2011 strongly before fading later in each year."

His worry is that economic weakness in Europe and elsewhere may cause the gains to fade.

Oil gains; gold and silver slide
Crude oil rose $1.45 to $97.81 a barrel in New York. Brent crude, which reacts more to Middle Eastern pressures, was up $1.75 to $113.08. Brent is up 2.1% this week and 6% for the year.

Oil moved higher after Iran's supreme leader vowed today to retaliate over oil sanctions and threats of military action by the West to stop Iran’s nuclear program. Ayatollah Ali Khameini warned that the United States in particular would face severe damage to its interests if any strike were carried out against its nuclear sites.

His comments were Khameini's most public response to mounting tension between Western powers and Iran in recent weeks. They came amid increasing concern among American officials that Israel may soon strike at Iran’s nuclear facilities.

Gold, meanwhile, settled down $19 to $1,740.30 an ounce. Silver was off 42.6 cents to $33.749 an ounce.

Interest rates moved higher on the jobs report. The 10-year Treasury yield rose to 1.949% from Thursday's 1.825%. The dollar was higher against major currencies.

Energy prices -- New York close
			Fri.			Thur.			Month chg.			YTD chg.
Crude oil (-CL)			$97.84			$96.36			-0.65%			-1.00%
(per barrel)
Heating oil (-HO)			$3.1144			$3.0529			1.68%			6.87%
(per gallon)
Natural gas (-NG)			$2.4990			$2.5540			-0.16%			-16.39%
(per mil. BTU)
Unleaded gasoline (-RB)			$2.9144			$2.8689			0.81%			9.67%
(per gallon)
Brent crude			$114.82			$112.07			3.24%			6.71%
(per barrel)
Retail gasoline			$3.4670			$3.4550			0.70%			6.06%
(per gallon; AAA)

A broad rally led by banks
Today's is a broad rally led by financial, consumer discretionary and energy stocks. All 10 sectors of the S&P 500 were higher. The weakest group was utilities stocks.

Transportation, housing and airline stocks were stronger, as were housing, steel and small-cap stocks.

The reason Simon Property Group hit an all-time high today was that it reported a 10.7% gain in sales per square foot at its shopping malls -- a sign the big mall isn't dead yet. The company boosted guidance and raised its dividend to 95 cents a share from 90 cents. Shares closed up $1.28 to $138.73. Shares rose 29.6% in 2011 and are up 7.6% this year.

Twenty-seven of the 30 Dow stocks were higher, with Bank of America (BAC) the leader, up 39 cents to $7.84, its highest level since September. The two laggards were Merck (MRK), down 7 cents to $38.37, and Procter & Gamble (PG), down 55 cents to $62.77.

Meanwhile, nearly 430 S&P 500 stocks were higher, led by Genworth Financial (GNW), Gilead Sciences (GILD) and Tenet Healthcare (THC).

Eighty-eight Nasdaq-100 stocks were higher, led byGilead Sciencesand Sears Holdings (SHLD). Gilead said an experimental hepatitis C treatment, which came with its acquisition of Pharmasset, produced positive clinical trial results.

Apple hit a new intraday high of $460 and closed at $459.68, up $4.56. Microsoft hit a 52-week high of $30.40 before finishing at $30.24, up 29 cents. The close was its first above $30 since May 4, 2010. (Microsoft publishes MSN Money.)

Apple, Intel (INTC) and Microsoft contributed more than 10 points to the index's gain.

Shares of Micron Technology (MU) were halted this afternoon after news that CEO Steve Appleton, 51, was killed in a small-plane crash in Boise, Idaho, where Micron is headquartered. Before trading was halted, Micron was up 23 cents to $7.95.

Short hits from the markets -- New York close
			Fri.			Thur.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.0700%			0.080%			0.00%			600.00%
5-year Treasury note			0.785%			0.711%			0.00%			-5.42%
10-year Treasury note			1.949%			1.825%			8.34%			4.17%
30-year Treasury bond			3.151%			3.011%			7.40%			9.07%
Currencies
U.S. Dollar Index			79.057			79.110			-0.45%			-1.82%
British pound			1.5820			1.5813			0.21%			1.82%
(in U.S. $)
U.S. $ in pounds			£0.632			£0.632			-0.21%			-1.79%
Euro in dollars			$1.31			$1.31			0.07%			1.49%
(in U.S. $)
U.S. $ in euros			€ 0.761			€ 0.761			-0.07%			-1.46%
U.S. $ in yen			76.75			76.18			0.38%			-0.46%
U.S. $ in Chinese			6.32			6.30			-0.09%			-0.06%
yuan
Canada dollar			$1.007			$0.999			0.54%			2.62%
(in U.S. $)
U.S. dollar			$0.994			$0.999			-0.54%			-2.55%
(in Canadian $)
Commodities
Gold (-GC)			$1,740.30			$1,759.30			0.14%			11.07%
(per troy ounce)
Copper (-HG)			$3.902			$3.781			2.94%			13.55%
(per pound)
Silver (-SI)			$33.7490			$34.1750			1.46%			20.90%
(per troy ounce)
Wheat (-ZW)			$6.6075			$6.6275			-0.79%			1.23%
(per bushel)
Corn (-ZC)			$6.4450			$6.430			0.86%			-0.31%
(per bushel)
Cotton			$0.9748			0.9549			3.14%			6.33%
(per pound)
Coffee			$2.1890			2.1855			0.41%			-4.68%
(per pound)
Crude oil (-CL)			$97.84			$96.36			-0.65%			-1.00%
(per barrel)