NEW YORK - Wall Street ended the first week of the third quarter with a respectable gain Friday, shaking off early losses as investors found signs of strength in the government's June employment report.
For the most part, investors were relieved to hear that the unemployment rate held steady at 4.5 percent in June for the third straight month, as expected, and that 132,000 jobs were added - fewer than in May, but slightly higher than the average forecast.
The Labor Department data also showed that a larger number of jobs were created in April and May than previously thought, and that June's average work week ticked up 0.1 percent.
Friday's jobs report was the most significant economic release of the shortened Fourth of July week, and indicated a fairly robust job market, given the slow-growing economy. If the majority of Americans are employed, they likely will keep spending and boosting corporate profits.
But the market had some early mixed feelings about the report, and the major indexes began the day with declines.
While the positive snapshot boded well for the long-term performance of the stock market, it also raised worries that a too-strong economy will make the Federal Reserve more willing to raise rates to curb inflation. Though the central bank said last week that inflation appears to be moderating, it wants to see further evidence before it considers loosening monetary policy.
Treasury bond prices weakened after the employment numbers, pushing up the 10-year Treasury note's yield to 5.18 percent from 5.15 percent late Thursday. High yields can make mortgages more expensive for home buyers, slow business deals, and make bonds appear a more attractive investment than stocks.
But to many market watchers, higher rates are a positive sign; John O'Donoghue, co-head of equities at Cowen & Co., said it is unlikely investors will start selling stocks to invest in Treasury notes unless the 10-year yield rises and stays above the 5.25 percent to 5.30 percent level.
"If yields are going higher because there's growth in the economy, that's actually good for stocks," O'Donoghue said.
The Dow Jones industrial average rose 45.84, or 0.34 percent, to 13,611.68.
Broader stock indicators also pared early losses and advanced. The Standard the S and the Nasdaq advanced 63.28, or 2.43 percent.
The first week of the second half of 2007 saw strong gains Monday, when the 10-year Treasury note's yield dipped below 5 percent for the first time since early June. Stocks floundered later in the week, though, as yields rebounded. Though some analysts say the week's unevenness was due to low trading volumes, others point out that it continues the recent pattern of volatility.
"I think the market, generally, entered the second half with more uncertainty, a little bit of caution, and sensitivity to bond rates - that's what's changed," said Alexander Paris, economist and market analyst for Chicago-based Barrington Research.
Takeover activity has been helping the stock market stay afloat lately, and the market got another piece of buyout news late Thursday: Advanced Medical Optics Inc. made a
$4.23 billion cash-and-stock bid for eye-care products competitor Bausch & Lomb Inc., beating a $3.67 billion cash bid by a private equity firm.
Advanced Medical Optics fell 4 cents to $35.85 after analysts said Friday it would probably have to sell some businesses to appease regulators. Bausch & Lomb closed unchanged at $72.
Chicago Mercantile Exchange Holdings Inc. upped its bid to buy its rival CBOT Holdings Inc. for the third time ahead of Monday's shareholders vote. The Chicago Mercantile Exchange rose $19.11, or 3.4 percent, to $574.80, while CBOT jumped $17.85, or 8.7 percent, to $224.
Crude oil futures, trading at 10-month highs, rose $1.00 to $72.81 a barrel on the New York Mercantile Exchange, buoyed by renewed violence and kidnappings in Nigeria, Africa's biggest oil producer.
The dollar was mixed against most other major currencies. Gold prices rose.
The Russell 2000 index of smaller companies rose 2.18, or 0.26 percent, to 852.31.
In Asian trading, Hong Kong's Hang Seng Index rose 1.25 percent to its fourth straight record close. After plummeting 5.3 percent Thursday, the China's Shanghai Composite Index surged 4.6 percent. Japan's Nikkei stock average fell 0.44 percent.
In European trading, Britain's FTSE 100 rose 0.83 percent, Germany's DAX index rose 0.77 percent, and France's CAC-40 rose 0.71 percent.