Last updated: October 8, 2010 9:45 pm

US stocks higher on hopes of monetary intervention

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US stocks advanced, with the Dow rising above the key 11,000 mark for the first time since May, after weak jobs data raised investors’ hopes that the Federal Reserve could embark on further quantitative easing.

The S&P 500 closed up 0.6 per cent to 1,165.15 on Friday, higher by 1.8 per cent over the week.

The Dow Jones Industrial Average had gained 0.5 per cent to close at 11,006.48, up 1.9 per cent over the five days. The Dow has not closed above 11,000 since May 3.

The Nasdaq Composite closed 0.8 per cent higher at 2,401.91, gaining 1.5 per cent on the week.

After rallying on Tuesday, markets have been tepid, often moving in opposition to the dollar. Materials stocks were the main gainers over the week as the weak dollar pushed commodity prices up.

On Friday, the government’s non-farm payroll data showed that the US economy unexpectedly lost 95,000 jobs in September when economists had forecast a slight drop of about 5,000. A drop in government employment pulled the total figure down. Private payrolls climbed by 64,000 against a forecast for a gain of about 75,000.

“We can’t get too excited because the figures are not strong, but it’s not even clear that it’s so weak that it could guarantee quantitative easing,” said Anthony Chan, chief economist at JPMorgan Private Wealth Management.

“Between now and that two-day meeting [of the Federal Open Market Committee] on 2-3 November, we’ll continue to see the market move from hot to cold and cold to hot.”

He added that the preliminary reading for third-quarter gross domestic product, released days before the meeting, will be closely watched.

Materials stocks led the risers once again, advancing 2 per cent. Freeport-McMoRan Copper & Gold added 4.5 per cent to $95.51, AK Steel advanced 4.2 per cent to $14.48 and US Steel rose 3.3 per cent to $45.92. Alcoa also helped buoy the materials sector as it kicked off the earnings season, announcing its results after the closing bell on Thursday.

The shares surged 5.7 per cent to $12.89 after the aluminium producer beat expectations with earnings of 6 cents per share, compared with estimates of 5 cents. Net income fell because of a decline in prices which did not outweigh the rising demand for industrial goods.

The company raised its outlook for global aluminium consumption in 2010 to grow at a rate of 13 per cent from a previous projection of 12 per cent, driven by emerging economies.

Chipmaker Micron Technology also reported earnings after the closing bell. The shares rose 6.8 per cent to $7.59 even though it missed estimates on profit and revenue. In the fourth quarter, net income was 32 cents per share, compared with the consensus forecast of 38 cents.

The company said that weak spending by corporations and consumers had hit PC memory chip prices and warned that in the long term, the rise of tablet computers such as the Apple iPad, would affect demand for PCs.

In deals news, the Genzyme board asked shareholders to reject a $69 a share bid from French pharmaceutical group Sanofi-Aventis , saying the valuation did not recognise the potential of its experimental drug pipeline. The company, which makes treatments for rare genetic conditions, said that Sanofi had proposed a price range of $69 a share to $80 a share at a meeting on September 20.

Shares in Genzyme gained 0.5 per cent to $72.75 while US-listed shares in Sanofi-Aventis nudged up 0.5 per cent to $34.21.

BlackBerry maker Research in Motion rose 3 per cent to $49.36 after the United Arab Emirates said it would not ban use of the handset as previously planned next week because the company had now complied with its regulations.

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