U.S. stocks rallied and Treasury bonds finished flat to slightly higher on Friday as a government report showed moderate U.S. job growth in August and supported the view that the Fed will keep interest rates on hold this month, Reuters reported. The Standard & Poor's 500 index climbed to nearly a four-month high, while Treasury bond yields hovered at their lowest levels since March. In New York, oil fell below $70 a barrel and gold sank. The dollar slipped in afternoon trading against the euro and the yen, reversing slight gains earlier in the session. Wall Street's day got off to a good start when the government said 128,000 jobs were added to nonfarm U.S. payrolls in August, slightly higher than expected. The jobs data, which also showed slower wage inflation, reinforced expectations that benchmark U.S. rates will be left steady again when the Federal Reserve's policy-setters meet on Sept. 20. In August, the Fed to decided to pause after raising rates 17 times in two years since June 2004. "It was pretty much a perfect number. It was not so strong the Fed will re-engage nor so weak you are concerned the economy is starting to stumble," said Stephen Massocca, co-chief executive of Pacific Growth Equities, in San Francisco. Stock investors saw the payrolls growth as a sign that there is enough strength in the U.S. economy to sustain future corporate earnings even as worries mount about the fallout from a housing slowdown, a driver of consumer spending. Pending sales of U.S. homes sank in July to their lowest level in more than three years, the National Association of Realtors said. The Dow Jones industrial average rose 84.04 points, or 0.73 percent, to 11,465.19, a day after it registered its best monthly gain since April. The Standard & Poor's 500 Index added 7.86 points, or 0.60 percent, to 1,311.68, after hitting a session high at 1,312.03 -- the highest on an intraday basis since May 11, when it reached 1,322.63. The Nasdaq Composite Index gained 13.83 points, or 0.63 percent, to 2,197.58. U.S. financial markets will be closed on Monday for the Labor Day holiday. BIG CAT LIFTS THE DOW Shares of companies sensitive to economic cycles rose, including heavy-equipment maker Caterpillar Inc. and chemicals company DuPont Co. Caterpillar contributed the most to the Dow's gain. Its stock was up 1.6 percent at $67.38, while DuPont shares shot up 1.8 percent to $40.70 in light New York Stock Exchange trading. Wal-Mart Stores Inc., the world's biggest retailer, was among the top-weighted gainers in the S&P 500 and helped lift the Dow. Its stock was up 2.1 percent at $45.66. Wal-Mart's customers, which include senior citizens on fixed incomes, benefit when oil and gasoline prices fall. Shares of the world's biggest chip maker Intel Corp. jumped 1.8 percent to $19.92 and helped buoy the Nasdaq after a brokerage raised its rating on the stock. In another report on a data-heavy Friday, the Institute for Supply Management reported a slowdown in U.S. factory activity in August and its prices-paid index also fell. That also soothed inflation worries. In overseas trading, major stock indexes were mixed. The FTSEurofirst 300 index of pan-European shares rose 0.4 percent, or 5.52 points, to close at 1,377.52. Investors bought European bank and mining shares after the U.S. jobs data stirred hopes the Fed may keep rates on hold. In Tokyo, Japan's benchmark Nikkei average dipped 0.04 percent, or 6.51 points, to close at 16,134.25. DOLLAR DIPS, BONDS FLAT TO UP A TOUCH Traders sold dollars for euro and yen on the belief that the Fed may be done raising rates, after a blitz of economic reports showed slower economic growth and mild inflation. Earlier, the dollar had gained on modest short covering. Late afternoon in New York, the euro was up 0.2 percent at $1.2831 from $1.2806 late Thursday. Against the yen, the dollar was down 0.2 percent at 117.11 yen from 117.34 yen late Thursday. U.S. Treasury debt prices ended the day little changed to slightly higher on the outlook for steady interest rates, reversing early declines right after the jobs data. The Bond Market Association recommended an early close at 1800 GMT ahead of the long holiday weekend. The benchmark 10-year U.S. Treasury note was steady at 101-5/32, with the yield at 4.73 percent, its lowest level since March. The two-year note was up 1/32 at 100-7/32 for a yield of 4.76 percent, while the 30-year bond was up 2/32 at 94-6/32, yielding 4.88 percent. U.S. crude oil for October delivery fell $1.07 to end at $69.19 a barrel on the New York Mercantile Exchange. Expectations that potential United Nations sanctions against oil exporter Iran may be delayed amid calls for more diplomatic work with Tehran and the absence of any new storm threat in the Atlantic gave the market pause. COMEX gold futures for December delivery slid $1.60 to settle at $632.60 an ounce.
