Dow up 77 as US stocks soar

Wall Street extended its New Year’s rally today, as investors interpreting a slowdown in monthly job recruitment as a precursor to the end of the Federal Reserve’s interest rate hikes.

The major indexes surged this week, finishing at their highest levels since mid-2001.

Strong advances for Yahoo and Google drove the technology sector, building on the market’s energetic start to 2006. An upbeat reaction to IBM’s pension news lifted the Dow Jones industrials within reach of 11,000.

Traders were mostly optimistic about a Labour Department report that employers added 108,000 jobs last month, about half the 200,000 increase forecast by economist and well behind November’s 305,000 gain.

The languishing job growth signalled a slowing economy, one reason analysts believed the Fed would soon stop its string of rate increases. But a 0.3% jump in hourly wages – topping estimates for a 0.2% rise – renewed worries about inflation if that pattern was sustained.

“After the market rallied hard on the Fed minutes earlier this week, the perception had been building that good, but not strong, economic data is positive because that signals the Fed having to raise rates less,” said John Caldwell, chief investment strategist for McDonald Financial Group. “It’s one of those cases where good news is bad news for the economy.”

The Dow gained 77.16, or 0.71%, to 10,959.31. The Dow advanced 165 points - the average has not closed above 11,000 since June 7, 2001, before the September 11 attacks.

Broader stock indicators had their best finish since May 2001. The S&P 500 was up 11.97, or 0.94%, at 1,285.45, and the Nasdaq climbed 28.75, or 1.26%, to close at 2,305.62.