US Stocks soar on hopes the Fed will pull back

The Nasdaq composite index climbed 230.88 points, or 6.44 per cent, to 3,813.38, bringing its gain for the week to 608 points, or 19 per cent. It was the first close above 3,800 since May 5, but the index is still down 6.29 per cent for the year and off 24.47 per cent from its March 10 record high of 5,048.62.

Technology leaders along with Internet, computer-chip and biotech shares soared, pulling all major sector indexes forward more than 6 per cent. The strength of tech stalwarts helped boost the blue-chip Dow Jones industrial average by 142.56 points, or 1.34 per cent, to 10,794.76. Interest-rate-sensitive bank, broker and retail stocks also posted strong gains.

The Dow added 496 points this week, or 4.8 per cent. Measures of the broader market shot higher as well. The Standard & Poor’s 500 index climbed 28.45 points, or 1.96 per cent, to 1,477.26 while the Wilshire 5000 index, which gauges roughly the entire US equity market, rose 366.26 points, or 2.74 per cent, to 13,734.37.

The buying spree was sparked by a US Labour Department report showing that hourly earnings – an indicator of wage-level inflation – rose only 0.1 per cent to $13.65 while a 0.4 per cent boost had been expected. May non-farm payrolls grew by 231,000 – sharply below the 386,000 forecast by economists in a Reuters survey.

"The market really liked the numbers," said Doug Myers, vice president of equity trading, Wachovia Securities. "It means the economy is slowing down. The Fed’s actions are doing what they were supposed to do. The cost of borrowing does not need to continue going up."

In a separate report from the Commerce Department, orders for US Manufactured goods posted their sharpest decline in nearly a decade in April as demand for electronics and electrical goods suffered their largest drop on record.

The recent series of softer-than-expected economic reports,including retail sales, durable goods, new home sales and an easing in the National Association of Purchasing Management’s business conditions index have suggested the Fed’s anti-inflation campaign is working.

Traders were also encouraged by robust trading volume afterrecent sessions of lackluster activity. On the NYSE, 1.16 billion shares changed hands with advancers trouncing decliners almost 3 to 1. On the Nasdaq, 1.90 billion shares traded.

Top Wall Street firms have slashed their forecasts for arate increase by the Federal Reserve at the central bank’s policy-setting meet on June 27-28.. Of 27 primary dealers of U.S. Government securities, only four now expect the Fed to increase rates by 25 basis points this month.

None saw the Fed raising rates by 50 basis points.

Bond prices rallied most of the day, but ended mixed. The10-year U.S. Treasury note gained 4/32, with the yield dropping to 6.17 percent from Thursday’s close of 6.19 percent. The 30-year bond fell 2/32, with the yield inching up to 5.95 percent from Thursday’s close of 5.94 percent.

Internet stocks were among the best-performing groups,boosted by a report that Morgan Stanley Dean Witter’s top sector analyst, Mry Meeker, said the worst was over for select stocks.

The American Stock Exchange’s Internet index jumped 9.34percent to 490.27.

Bank and brokerage stocks also soared, with many hittingnew 52-week highs. Merrill Lynch rose 3-15/16 to 108-3/16 while Citigroup rose 2-5/8 to 66-1/4, touching a new high of 66-3/4, along with Bank of New York, up 11/16 at 48-5/8, also touching a new high of 49-3/4.

Telecommunications and wireless shares were some of themost active stocks on the New York Stock Exchange, with Motorola Inc. leading the way, up 3-7/8 at 36-7/8 after a three-for-one stock split.

Lucent Technologies rose 3 to 63-1/8 while Nortel Networksgained 2-9/16 to 60-1/16 and AT&T Corp. inched up 3/16 to 35-1/8 after the Federal Communications Commission said it was within days of acting on the telecom giant’s proposed buy of MediaOne Group Inc.

On the downside, investors moved stocks out of groups theyhad been using as safe havens amid fears of higher interest rates. Drug stocks rolled back, leaving the American Stock Exchange’s pharmaceutical index down 3.29 percent at 375.53.

Oil and energy stocks lost ground. ExxonMobil was off 3-3/4to 79-3/16.