Stocks closed sharply higher Friday in active trading as the Dow industrials extended their gains late in the day to top the 2900 level and post a new record high.
The Dow Jones industrial average, which eased 1.90 Thursday, rose 24.31 to 2900.97, breaking the record of 2878.56 set Wednesday.Among broad market gauges, the New York Stock Exchange composite index rose 1.09 to 198.03 and Standard & Poor's 500-stock index rose 1.93 to 363.16, another record high. It has set a record in each session this week. The price of an average share rose 20 cents.
Advances led declines 974-574 among the 2,025 issues crossing the NYSE tape. Big Board volume totaled 187,860,000 shares, up from 165,690,000 shares traded Thursday.
Expectations of lower interest rates fueled the gains in stocks Friday.
The market opened sharply higher, with the Dow industrials up more than 20 points, after the government issued an unexpectedly weak report on May employment.
The jobless rate dipped to 5.3 percent but job growth of 164,000 was almost entirely due to the hiring of legions of temporary workers to canvass the country for the government's 1990 census.
Many economists predicted a jobless rate of 5.4 percent for the month but the economy was expected to have created 135,000 new jobs, excluding census workers.
The news sent the bond market on a tear, sparking speculation the Fed might loosen the reins on credit. In late trading, the 30-year bond was up 1 1/2 points, sending the yield down sharply.
While stocks followed bonds in the early going, more profit taking after the market's sharp gain Tuesday soon set in and prices fell from their highs.
But the Dow industrials recovered their lost ground in late trading as a surge of buying near the close sent the blue chip index above 2900. It had retreated from that level a few times Friday.
"The whole thing was that bonds were extremely strong," said Brad Weekes, senior vice president at Donaldson, Lufkin & Jenrette Securities Corp. "Interest rates are coming down, the perception is that the economy is in decent shape and inflation is under control."
Weekes contended that traders really did not assign much importance to the economic weakness revealed in the job data. "What you need to look at is the huge mutual fund cash positions," he said, which represent more fuel for the rally.
Other analysts were slightly disappointed with the market's performance in the face of such a powerful rally in the bond market. Hugh Johnson, chief economist at First Albany Corp. in Albany, N.Y., said he felt there was some concern in the market about weakness in the economy and its possible effect on corporate earnings which held the market back somewhat.
"Stocks have focused over the last four weeks on rates going down in the bond market, not on the tradeoff of a slowing economy and the possibility that earnings may not recover," said Johnson. "But I think today we're starting to see some concern about earnings, especially with stocks at these levels. People are saying, `We'd better have the earnings to justify stocks at these levels."'
On the trading floor, L.A. Gear was the most active issue, sinking 8 1/2 to 30 3/4 after saying it expected earnings for its quarter ending May 31 to be 50 to 60 cents a share, compared with 91 cents in the year-ago period.
Varity followed, up 1/8 to 3 3/8. Philip Morris was third, up 1 1/8 to 43 1/4.