Employment Data Boost Wall Street
Stock futures are extending their gains as the government says fewer jobs were lost in April than expected.
Investors hopeful for an economic recovery are cheering the report, which showed employers cut 539,000 jobs last month. That is a big improvement from a revised 699,000 job losses in March and less than the loss of 610,000 jobs analysts had been expecting.
Futures were already rising on the results of the government’s stress tests of banks. The government says 10 of the 19 largest U.S. banks must raise about $75 billion in new capital — less than some had feared.
Dow Jones industrial average futures are up 102 to 8,489. Standard & Poor’s 500 index futures are up 12 to 919, while Nasdaq 100 index futures are up 12 to 1,406.
The Labor Department’s monthly employment report is a key gauge of the state of the economy, and investors were hoping the report to be released before the market opens would show fewer job losses last month than in March.
The market has been on an upward swing since early March, rising more than 25 percent from 12-year lows on good news about business at banks and an increasing amount of improving economic data on housing, manufacturing and other key sectors of the economy. But many challenges remain. Analysts say the jobs report could easily upset the market’s advance if worse than expected, or be the catalyst to take stocks higher if it brings further signs of recovery.
Investors also are encouraged by the results of the government’s “stress tests” of the 19 largest U.S. banks, released after the market’s close on Thursday.
Though some results had been leaked preceding the formal release, investors still seemed pleased, sending stock futures turned higher immediately after the government released its report after the markets closed Thursday. It said 10 of the banks would need a total of about $75 billion in new capital to withstand losses if the economy worsens. Some investors feared the test results would show the big banks needed much more capital.
Ahead of Friday’s opening, Dow Jones industrial average futures soared 101, or 1.2 percent, to 8,488. Standard & Poor’s 500 index futures gained 12, or 1.3 percent, to 919, while Nasdaq 100 index futures are up 11.25, or 0.8 percent, to 1,405.75.
On Thursday, the Dow ended down 102 points, erasing the previous day’s gains as investors locked in profits ahead of the stress test results. With Thursday’s loss, the index is down 4.2 percent for the year. Broader indexes also declined.
The market got some positive news on the labor market earlier this week. New applications for unemployment benefits fell unexpectedly last week to the lowest level in 14 weeks. That reading followed a better-than-expected private snapshot of the labor market on Wednesday.
Financial stocks, which have largely led the market’s spring rally, were mostly higher in pre-market trading.
Citigroup Inc. gained 45 cents, or 12 percent, to $4.26, while shares of Bank of America Corp. jumped $1.89, or 14 percent, to $15.40. The stress tests found that the Charlotte, N.C.-based bank needs by far the most capital of any of its peers — $33.9 billion. The bank plans to raise about $17 billion in capital in the coming weeks, and plans an additional $10 billion in asset sales.
Wells Fargo & Co. needs $13.7 billion, GMAC LLC $11.5 billion, Citigroup Inc. $5.5 billion and Morgan Stanley $1.8 billion. Both Wells Fargo and Morgan Stanley have also announced plans to raise capital through public stock offerings. Citigroup said it plans to convert $5.5 billion of preferred shares into common stock to raise the extra funds.
The other firms found to need a bigger capital cushion are Regions Financial Corp., SunTrust Banks Inc., KeyCorp, Fifth Third Bancorp, and PNC Financial Services Group Inc.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 3.33 percent from 3.27 percent late Thursday.
The dollar fell against other major currencies, while gold prices rose.
Light, sweet crude rose $1.50 to $58.21 in electronic trading on the New York Mercantile Exchange.
Overseas, Japan’s Nikkei stock average rose 0.5 percent. In afternoon trading, Britain’s FTSE 100 gained 1.8 percent, Germany’s DAX index was up 2.9 percent, and France’s CAC-40 added 2.4 percent.
5/8/2009 8:40 AM SARA LEPRO AP Business Writer NEW YORK