Stocks Rise on Hopes of Job Growth

Stocks surged Monday despite another jump in oil and other commodity prices as many investors focused on a sign of stronger job growth in the manufacturing sector.

The market rally left several key indexes near multiyear highs, reinforcing the view that Wall Street expects the economy to keep rolling, analysts said.

The Dow Jones industrial average gained 94.22 points, or 0.9%, to 10,678.14, leaving it 60 points shy of the 32-month high reached Feb. 11. The broader Standard & Poor’s 500 index rose 11.02 points, or 1%, to 1,155.96, less than 2 points from its recent high, also reached Feb. 11.

Stocks advanced even as oil prices rose to their highest level since the start of the Iraq war nearly one year ago. Near-term crude futures in New York jumped 70 cents to $36.86 a barrel. Oil is up 13% this year amid worries about surprisingly tight U.S. supplies.

Typically, rising energy prices would cause concern on Wall Street. But for now, many investors seem to be paying more attention to any news that supports the theme of an improving economy.

Monday’s rally was stoked by a report from the Institute for Supply Management showing that U.S. manufacturing activity continued to expand in February and that an index of employment growth in the sector rose to its best level in 16 years.

“It was a very optimistic report,” noted Alfred Kugel, investment strategist at Stein Roe Investment Counsel in Chicago. “It says the fundamentals of the economy are still quite positive.”

The news also raised hopes that Friday’s government report on the U.S. labor market in February would show faster job creation. Employment growth has been the missing link in the economic rebound.

Stronger job growth would give investors more of a reason to believe that the economic expansion -- and rising corporate earnings -- could continue, Kugel said.

The manufacturing report helped to drive up prices of heavy-industry shares Monday, including U.S. Steel, which soared $2.41 to $39.16, its best level in six years.

Most other market sectors also rallied. Winners topped losers by 3 to 1 on the New York Stock Exchange and by 2 to 1 on Nasdaq.

The technology-dominated Nasdaq composite index, which weakened in February as some investors took profits in tech stocks, rebounded 27.98 points, or 1.4%, to 2,057.80.

A Standard & Poor’s index of 600 small-company stocks rose 1.7% to 288.09, a record high.

Higher oil prices lifted many energy-related shares, including San Ramon, Calif.-based ChevronTexaco, up $1.92 to $90.27, and Occidental Petroleum of Los Angeles, up $2.03 to $46.43.

Oil is just one of many raw materials that have been rocketing in price over the last year. On Monday, platinum futures prices topped $900 an ounce for the first time in 24 years. Soybean futures rose to 15-year highs.

The CRB/Reuters index of 17 key commodities jumped 1.4% to 278.61, its highest since 1984.

Rising commodity prices often are considered to be inflationary. But neither the stock market nor the bond market is taking that view this time, said David Joy, markets strategist for American Express Financial Advisors in Minneapolis.

Indeed, Treasury bond yields were little changed Monday despite the commodity rally.

In part, investors are betting that companies won’t be able to pass on higher raw materials prices to consumers, and will have to make up for those costs with productivity gains, Joy said.

More important, he said, is that rising commodity prices buttress the idea that global demand for goods is improving.

The pullback in technology stocks and some other market sectors in February suggested that investors had doubts about the economy’s pace. “Now,” Joy said, “it looks as if we’re back to thinking that the expansion is going quite well.”

Among Monday’s highlights:

* In the industrial sector, Eaton increased $1.35 to $59.89, Deere was up $1.08 to $65.31 and Cummins leaped $1.97 to $51.37.

* In another vote of confidence in the economy, most home builders soared for a third consecutive session. KB Home jumped $4.12 to $76.47, Ryland rose $3 to $88.72 and Standard Pacific rallied $2.86 to $55.17.

* Most major foreign markets closed higher. The main Mexican market index rose 1.7% to a record high of 10,157.13. In Japan the Nikkei-225 index gained 2.1% to 11,271.12, a 52-week high.