Wall St shrugs off unemployment data

Wall Street stocks on Friday brushed aside data that showed the US unemployment rate hit a 14-year high and fresh fears over the future of the country’s automakers to recover some of their election week losses.

Observers concurred that the 240,000 job cuts last month – coupled with a substantial downward revision to the September figures – were abysmal. Yet some analysts expected losses of up to 300,000 and strategists said traders had come to expect the worst.

Alan Ruskin of RBS Global Banking & Markets said the market’s reaction confirmed that “short-term weakness is largely priced in”. Speculation that the grim figures would prompt the Federal Reserve to follow other central banks and once again cut interest rates, as well as President-elect Barack Obama’s comments that he hoped a second stimulus package would be passed “sooner rather than later”, also helped sentiment.

The benchmark S&P 500 index closed 2.9 per cent higher at 930.99 points. The Dow Jones Industrial Average was up 2.9 per cent to 8,943.81 while the Nasdaq Composite Index rose 2.4 per cent to 1,647.4. That pared the benchmark S&P’s weekly losses to 3.9 per cent, the Dow’s to 4.1 per cent and the Nasdaq’s to 4.3 per cent.

The future of carmakers General Motors and Ford topped a long list of traders’ concerns that came to a head on Friday, when they disclosed the vast scale of their quarterly losses and the former said its liquidity was nearing the minimum required to operate its business, which led S&P to cut its debt rating. They closed down 9.2 per cent at $4.36 and up 2 per cent at $2.02, respectively after Mr Obama said government assistance for the ailing industry would be a top priority for his new administration.

Friday’s sell-off took their losses for the week to 24.7 per cent and 7.8 per cent, respectively. Financials were the only economic sector in the red for much of the morning, although by the close they had eked out a 2 per cent gain.

Wells Fargo rose 2.5 per cent to $29.50 after the bank sold $11bn of stock at a discount to fund its acquisition of Wachovia.

Goldman Sachs lost 3.6 per cent to $77.78 after JPMorgan warned of its exposure to the world equity markets. JPMorgan analysts, who previously forecast a profit in the fourth quarter, now forecast a loss.

They also expected that Morgan Stanley would “navigate the quarter somewhat better” than Goldman Sachs due to lesser exposure to private equity, and its shares rose 3.8 per cent to $15.98.

Elsewhere in financials, Citigroup gained 2.6 per cent to $11.82 after Reuters reported that the bank was set to lay off workers in several departments. It cited investment banking, sales and trading.

The week began in muted fashion but quickly returned to the kind of volatility of recent weeks. A strong rally on Tuesday, polling day, gave way to the biggest two-day sell-off since 1987, as signs of a weakening economy returned to haunt the market. Volumes remained thin as buyers sat on the sidelines.

A glut of downbeat data on mortgages, jobs and the service sector throughout the week preceded Friday’s grim payroll report.

Helping to stem the losses, some companies – such as MasterCard – reported better-than-expected quarterly figures. Still, shares in the credit card group were down 0.1 per cent over the week at $147.73.

Cisco sparked fears for corporate IT spending when the technology bellwether issued a downbeat assessment of prospects. The shares fell 1.1 per cent over the week to $17.58.

A weakening advertising market hit News Corp and Walt Disney, which shed 20.2 per cent to $8.48 and 9.8 per cent to $23.36, respectively. In technology, Yahoo advanced after Jerry Yang, chief executive, rekindled the prospect of a deal with Microsoft. It finished the week down 4.8 per cent to $12.20.