US stocks: Market jumps on tobacco case, rate expectations

NEW YORK - US stocks surged ahead on Friday, boosted by a rise in cigarette makers after a favourable court ruling and a weaker-than-expected jobs report that eased concerns about faster interest-rate hikes.

Tobacco companies jumped after a US appeals court rejected the government's bid to force cigarette makers to pay billions of dollars in past profits as part of its racketeering case against the industry.

Altria Group Inc., which owns Philip Morris USA, rose 5 per cent, or US$3.26, to US$67, while Reynolds American Inc., the parent of R.J. Reynolds Tobacco Co., surged 4.5 per cent, or US$3.69 to US$85.60.

The Dow Jones industrial average rose 123.03 points, or 1.16 per cent, to 10,716.13. The Standard & Poor's 500 Index was up 13.14 points, or 1.10 per cent, at 1,203.03. The Nasdaq Composite Index was up 29.02 points, or 1.41 per cent, at 2,086.66.

The S&P closed at a high for the year and all three indexes posted their best percentage gains this year.

All three rose for a second straight week. The Dow ended up 2.8 per cent, the S&P rose 2.7 per cent and Nasdaq climbed 2.5 per cent. In terms of gains in points for the week, the Dow added 288.93 points, the S&P gained 31.67 points and Nasdaq rose 50.83 points.

Stocks were boosted by an unexpectedly weak jobs report, which pared back expectations about how aggressively the Federal Reserve will be in raising interest rates.

US employers added just 146,000 jobs in January, the government said. A drop in the number of job-seekers pushed the unemployment rate to 5.2 per cent, its lowest level in more than three years.

That sent Treasuries prices rushing higher, as traders bet that the labor market wouldn't be a cause of inflation any time soon.

"We got Goldilocks-type economics data this morning which got both bonds and stocks on the go," said Bryan Piskorowski, market analyst at Wachovia Securities LLC.

"The bond rally stems from an easing inflation risk and as a result, the potential for a more friendly Fed as we move forward. While equities should be troubled by slowing economic growth, they're likewise taking solace in the prospect for a more benign Fed. "

Traders said the market also got a boost from Fed Chairman Alan Greenspan's comments at a conference hosted by the British Treasury. The Fed chairman said that market forces and promised action by Washington to cut its budget deficit look set to stabilise, and could cut, the record US trade gap.

Home builders rose after the yield on 10-year Treasury notes fell. Since home mortgage rates are tied to the 10-year yields, their shares gained on the prospect of stronger home sales.

Pulte Homes climbed 6.6 per cent, or US$4.38 to US$70.72 and KB Home jumped 3.8 per cent, or US$4.22 to US$116.22.

Semiconductor shares got a boost after Prudential Equity Group raised its investment rating on the sector and upgraded Texas Instruments Inc., the world's largest maker of chips for cell phones. Texas Instruments rose 7 per cent, or US$1.62 to US$24.75.

The Philadelphia Stock Exchange semiconductor index climbed 4.36 per cent.

Cardinal Health Inc. fell 3.2 per cent, or US$1.91 to US$58.18 after the company, which has been the subject of a federal accounting investigation, said it fired some employees following an internal accounting probe. It also reported lower-than-expected quarterly profit.

Overall, trading was active, with 1.59 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.86 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.

Advancers outnumbered decliners on the New York Stock Exchange by 13 to 4 and by about 2 to 1 on Nasdaq.

- REUTERS