Strong gains signal renewed investor confidence

The Dow and S&P 500 hit new highs yesterday as investors showed a renewed confidence in the economy's strength.

Wall Street found reason for optimism in a stronger-than-expected jobs report for May. Nonfarm payrolls rose by 157,000 last month, a bigger increase than in April and more than analysts anticipated. The national unemployment rate held steady at 4.5%, as expected, according to the Labor Department.

The economic picture appeared brighter still following a lower reading on inflation from the Commerce Department and data from the Institute for Supply Management's May survey, which indicated that the manufacturing sector was strengthening.

Investors have been hoping a slowing economy will prompt the Federal Reserve to lower rates, something the central bank is loath to do if inflation remains defiantly above the Fed's target. The job figures yesterday pleased Wall Street, however, because they showed growth without a rise in wage inflation.

"If you can get job growth without wage inflation, that's about as positive as you can get," said Randy Frederick, director of derivatives at Charles Schwab. He said, however, investors would be tempted to take profits as the market climbs higher.

The Dow rose 40.47 to 13,668.11, its 26th record close for the year. It set a fresh intraday trading high of 13,692.00.

The S&P 500 gained 5.72 to 1,536.34, its third straight record finish. Wall Street marked a milestone this week when the S&P 500 set its first record close since 2000, signaling the broader market's recovery from the dot-com implosion early in the decade.

The tech-heavy Nasdaq advanced 9.40 to 2,613.92. Despite gains for the week that handily outpaced the Dow and S&P, the Nasdaq remains well off of its closing high of 5,048.62, set in March 2000; the index was arguably bloated then by frenzy over high-tech and Internet issues.

"As the market pushes higher and higher and higher, people start to get a little more uneasy about where it's at," Frederick pointed out.

While he contends the markets appear reasonable at present, he said prudent investors should remain cautious.THE ASSOCIATED PRESS
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